Dish Network 2000 Annual Report Download - page 78

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ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
F–27
VisionStar
During November 2000, one of EchoStar’s wholly owned subsidiaries purchased a 49.9% interest in
VisionStar, Inc. VisionStar holds an FCC license, and is constructing a Ka-band satellite, to launch into the 113
W.L. orbital slot. Together with VisionStar EchoStar has requested FCC approval to acquire control over
VisionStar by increasing its ownership of VisionStar to 90%, for a total purchase price of approximately $2.8
million. EchoStar has also provided loans to VisionStar totaling less than $10 million to date for the construction of
their satellite and expect to provide additional funding to VisionStar in the future. EchoStar is not obligated to
finance the full remaining cost to construct and launch the VisionStar satellite, but VisionStar’s FCC license
currently requires construction of the satellite to be completed by April 30, 2002 or the license could be revoked.
EchoStar currently expects to continue to fund loans and equity contributions for construction of the satellite in the
near term from cash on hand, and expect that it may spend approximately $79.5 million during 2001 for that purpose
subject to, among other things, FCC action.
Patents and Intellectual Property
Many entities, including some of EchoStar’s competitors, now have and may in the future obtain patents
and other intellectual property rights that cover or affect products or services directly or indirectly related to those
that EchoStar offers. EchoStar may not be aware of all patents and other intellectual property rights that its products
may potentially infringe. Damages in patent infringement cases can include a tripling of actual damages in certain
cases. Further, EchoStar cannot estimate the extent to which it may be required in the future to obtain licenses with
respect to patents held by others and the availability and cost of any such licenses. Various parties have asserted
patent and other intellectual property rights with respect to components within EchoStar’s direct broadcast satellite
system. EchoStar cannot be certain that these persons do not own the rights they claim, that its products do not
infringe on these rights, that it would be able to obtain licenses from these persons on commercially reasonable
terms or, if it was unable to obtain such licenses, that it would be able to redesign its products to avoid infringement.
DirecTV
During February 2000 EchoStar filed suit against DirecTV and Thomson Consumer Electronics/RCA in the
Federal District Court of Colorado. The suit alleges that DirecTV has utilized improper conduct in order to fend off
competition from the DISH Network. According to the complaint, DirecTV has demanded that certain retailers stop
displaying EchoStar’s merchandise and has threatened to cause economic damage to retailers if they continue to
offer both product lines in head-to-head competition. The suit alleges, among other things, that DirecTV has acted
in violation of federal and state anti-trust laws in order to protect DirecTV’s market share. EchoStar is seeking
injunctive relief and monetary damages. On December 8, 2000, EchoStar submitted an Amended Complaint adding
claims against Circuit City, Radio Shack and Best Buy, alleging that these retailers are engaging in improper
conduct that has had an anti-competitive impact on EchoStar. It is too early in the litigation to make an assessment
of the probable outcome. During October 2000, DirecTV filed a motion for summary judgment asking that the Court
enter judgment in DirecTV’s favor on certain of EchoStar’s claims. EchoStar has filed a motion asking the Court to
allow it an opportunity to conduct discovery prior to having to substantively respond to DirecTV’s motion.
DirecTV’s motion for summary judgment and EchoStar’s motion remain pending.
The DirecTV defendants filed a counterclaim against EchoStar. DirecTV alleges that EchoStar tortuously
interfered with a contract that DirecTV allegedly had with Kelly Broadcasting Systems, Inc. (“KBS”). DirecTV
alleges that EchoStar “merged” with KBS, in contravention of DirecTV’s contract with KBS. DirecTV also alleges
that EchoStar has falsely advertised to consumers about its right to offer network programming. DirecTV further
alleges that EchoStar improperly used certain marks owned by PrimeStar, now owned by DirecTV. Finally,
DirecTV alleges that EchoStar has been marketing National Football League games in a misleading manner. The
amount of damages DirecTV is seeking is as yet unquantified. EchoStar intends to vigorously defend against these
claims. The case is currently in discovery. It is too early in the litigation to make an assessment of the probable
outcome.