Dish Network 2011 Annual Report Download - page 48

38
38
Item 3. LEGAL PROCEEDINGS
We are involved in a number of legal proceedings (including those described below) concerning matters arising in
connection with the conduct of our business activities. Many of these proceedings are at preliminary stages, and
many of these cases seek an indeterminate amount of damages. We regularly evaluate the status of the legal
proceedings in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a
loss or additional loss may have been incurred and to determine if accruals are appropriate. If accruals are not
appropriate, we further evaluate each legal proceeding to assess whether an estimate of the possible loss or range of
possible loss can be made.
For certain cases described on the following pages, management is unable to provide a meaningful estimate of the
possible loss or range of possible loss because, among other reasons, (i) the proceedings are in various stages; (ii)
damages have not been sought; (iii) damages are unsupported and/or exaggerated; (iv) there is uncertainty as to the
outcome of pending appeals or motions; (v) there are significant factual issues to be resolved; and/or (vi) there are
novel legal issues or unsettled legal theories to be presented or a large number of parties (as with many patent-
related cases). For these cases, however, management does not believe, based on currently available information,
that the outcomes of these proceedings will have a material adverse effect on our financial condition, though the
outcomes could be material to our operating results for any particular period, depending, in part, upon the operating
results for such period.
Broadcast Innovation, L.L.C.
During 2001, Broadcast Innovation, L.L.C. (“Broadcast Innovation”) filed a lawsuit against us, DirecTV, Thomson
Consumer Electronics and others in United States District Court in Denver, Colorado. Broadcast Innovation is an
entity that seeks to license an acquired patent portfolio without itself practicing any of the claims recited therein.
The suit alleges infringement of United States Patent Nos. 6,076,094 (the “‘094 patent”) and 4,992,066 (the “‘066
patent”). The ‘094 patent relates to certain methods and devices for transmitting and receiving data along with
specific formatting information for the data. The ‘066 patent relates to certain methods and devices for providing
the scrambling circuitry for a pay television system on removable cards. Subsequently, DirecTV and Thomson
settled with Broadcast Innovation leaving us as the only defendant.
During 2004, the District Court issued an order finding the ‘066 patent invalid. Also in 2004, the District Court
found the ‘094 patent invalid in a parallel case filed by Broadcast Innovation against Charter and Comcast. In 2005,
the United States Court of Appeals for the Federal Circuit overturned that finding of invalidity with respect to the
‘094 patent and remanded the Charter case back to the District Court. During June 2006, Charter filed a request for
reexamination of the ‘094 patent with the U.S. Patent and Trademark Office and, on December 13, 2011, the U.S.
Patent and Trademark Office issued a certificate cancelling all claims of the ‘094 patent. On February 2, 2012,
Broadcast Innovation dismissed the case against us with prejudice.
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. On June 3, 2011, the U.S. Court of Appeals for the Ninth Circuit affirmed the
District Court’s motion to dismiss with prejudice. The plaintiff class sought rehearing en banc. On October 31,
2011, the Ninth Circuit issued an order vacating the June 3, 2011 order, directing that a 3-judge panel be
reconstituted, and denying the plaintiff class’ motion for rehearing. 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.