Dish Network 2009 Annual Report Download - page 133

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DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-43
Channel Bundling Class Action
During 2007, a purported class of cable and satellite subscribers filed an antitrust action against us in the United
States District Court for the Central District of California. The suit also names as defendants DirecTV,
Comcast, Cablevision, Cox, Charter, Time Warner, Inc., Time Warner Cable, NBC Universal, Viacom, Fox
Entertainment Group, and Walt Disney Company. The suit alleges, among other things, that the defendants
engaged in a conspiracy to provide customers with access only to bundled channel offerings as opposed to
giving customers the ability to purchase channels on an “a la carte” basis. On October 16, 2009, the District
Court granted defendants’ motion to dismiss with prejudice. The plaintiffs have appealed. We intend to
vigorously defend this case. We cannot predict with any degree of certainty the outcome of the suit or
determine the extent of any potential liability or damages.
Enron Commercial Paper Investment
During 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 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. On April 7, 2009, we settled the
litigation for an immaterial amount.
ESPN
During 2008, we filed a lawsuit against ESPN, Inc., ESPN Classic, Inc., ABC Cable Networks Group, Soapnet
L.L.C., and International Family Entertainment (collectively, “ESPN”) for breach of contract in New York
State Supreme Court. Our complaint alleges that ESPN failed to provide us with certain high-definition feeds
of the Disney Channel, ESPN News, Toon, and ABC Family. ESPN asserted a counterclaim, and then filed a
motion for summary judgment, alleging that we owed approximately $35 million under the applicable
affiliation agreements. We brought a motion to amend our complaint to assert that ESPN was in breach of
certain most-favored-nation provisions under the applicable affiliation agreements. On April 15, 2009, the trial
court granted our motion to amend the complaint, and granted, in part, ESPN’s motion on the counterclaim,
finding that we are liable for some of the amount alleged to be owing but that the actual amount owing is
disputed and will have to be determined at a later date. We will appeal the partial grant of ESPN’s motion.
Since the partial grant of ESPN’s motion, ESPN has sought an additional $30 million under the applicable
affiliation agreements. We intend to vigorously prosecute and defend this case. 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).
During 2006, we and EchoStar, 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
we do not infringe, and have not infringed, any valid claim of the ‘505 patent. During April 2008, the Federal
Circuit reversed the judgment against DirecTV and ordered a new trial. During January 2010, the Federal
Circuit affirmed the District Court’s grant of summary judgment to DirecTV, and dismissed the action with
prejudice. We are evaluating the impact of the Federal Circuit’s decision.
We intend to vigorously prosecute this case. In the event that a court ultimately determines that we infringe the
asserted 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.