Dish Network 2008 Annual Report Download - page 42

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32
Datasec
During April 2008, Datasec Corporation (“Datasec”) sued us and DirecTV Corporation in the United States
District Court for the Central District of California, alleging infringement of U.S. Patent No. 6,075,969 (the ’969
patent). The ‘969 patent was issued in 2000 to inventor Bruce Lusignan, and is entitled “Method for Receiving
Signals from a Constellation of Satellites in Close Geosynchronous Orbit.” In September 2008, Datasec
voluntarily dismissed its case without prejudice.
Distant Network Litigation
During October 2006, a District Court in Florida entered a permanent nationwide injunction prohibiting us from
offering distant network channels to consumers effective December 1, 2006. Distant networks are ABC, NBC, CBS
and Fox network channels which originate outside the community where the consumer who wants to view them,
lives. We have turned off all of our distant network channels and are no longer in the distant network business.
Termination of these channels resulted in, among other things, a small reduction in average monthly revenue per
subscriber and free cash flow, and a temporary increase in subscriber churn. The plaintiffs in that litigation alleged
that we were in violation of the Court’s injunction and appealed the District Court decision finding that we are not in
violation. On July 7, 2008, the Eleventh Circuit rejected the plaintiffs’ appeal and affirmed the decision of the
District Court.
Enron Commercial Paper Investment
During October 2001, we received approximately $40 million from the sale of Enron commercial paper to a third
party broker. That commercial paper was ultimately purchased by Enron. During November 2003, an action was
commenced in the United States Bankruptcy Court for the Southern District of New York against approximately 100
defendants, including us, who invested in Enron’s commercial paper. The complaint alleges that Enron’s October
2001 purchase of its commercial paper was a fraudulent conveyance and voidable preference under bankruptcy
laws. We dispute these allegations. We typically invest in commercial paper and notes which are rated in one of the
four highest rating categories by at least two nationally recognized statistical rating organizations. At the time of our
investment in Enron commercial paper, it was considered to be high quality and low risk. We cannot predict with
any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages.
Finisar Corporation
Finisar Corporation (“Finisar”) obtained a $100 million verdict in the United States District Court for the Eastern
District of Texas against DirecTV for patent infringement. Finisar alleged that DirecTV’s electronic program guide
and other elements of its system infringe United States Patent No. 5,404,505 (the ‘505 patent).
In July 2006, we, together with NagraStar LLC, filed a Complaint for Declaratory Judgment in the United States
District Court for the District of Delaware against Finisar that asks the Court to declare that they and we do not
infringe, and have not infringed, any valid claim of the ‘505 patent. Trial is not currently scheduled. The District
Court has stayed our action until the Federal Circuit has resolved DirecTV’s appeal. During April 2008, the Federal
Circuit reversed the judgment against DirecTV and ordered a new trial. Our case is stayed until the DirecTV action
is resolved.
We intend to vigorously prosecute this case. In the event that a Court ultimately determines that we infringe this
patent, we may be subject to substantial damages, which may include treble damages and/or an injunction that could
require us to modify our system architecture. We cannot predict with any degree of certainty the outcome of the suit
or determine the extent of any potential liability or damages.