Dish Network 2011 Annual Report Download - page 49

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Cyberfone Systems, LLC (f/k/a LVL Patent Group, LLC)
On September 15, 2011, LVL Patent Group, LLC filed a complaint against our wholly-owned subsidiary DISH
Network L.L.C., as well as EchoStar, EchoStar Technologies L.L.C., a wholly-owned subsidiary of EchoStar, and
DirecTV in the United States District Court for the District of Delaware alleging infringement of United States
Patent No. 6,044,382, which is entitled “Data Transaction Assembly Server.” On November 18, 2011, Cyberfone
Systems, LLC (f/k/a LVL Patent Group, LLC) filed an amended complaint making the same claim. DirecTV was
dismissed from the case on January 4, 2012.
We intend to vigorously defend 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 materially modify certain features that we currently offer to consumers. We cannot predict
with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages.
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. In October 2011, the jury returned a verdict in favor of the
defendants. We intend to appeal.
ESPN had asserted a counterclaim alleging that we owed approximately $35 million under the applicable affiliation
agreements. On April 15, 2009, the New York State Supreme Court granted, in part, ESPN’s motion for summary
judgment 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. On December 29, 2010, the New York State Supreme Court, Appellate Division,
First Department affirmed the partial grant of ESPN’s motion on the counterclaim. After the partial grant of ESPN’s
motion for summary judgment, ESPN sought an additional $30 million under the applicable affiliation agreements.
On March 15, 2010, the New York State Supreme Court affirmed the prior grant of ESPN’s motion and ruled that
we owe the full amount of approximately $66 million under the applicable affiliation agreement. As of December
31, 2010, we had $42 million recorded as a “Litigation accrual” on our Consolidated Balance Sheets.
On June 21, 2011, the First Department affirmed the New York Supreme Court’s ruling that we owe approximately
$66 million under the applicable affiliation agreements and, on October 18, 2011, denied our motion for leave to
appeal that decision to New York’s highest court, the New York Court of Appeals. We sought leave to appeal
directly to the New York Court of Appeals and, on January 10, 2012, the New York Court of Appeals dismissed our
motion for leave on the ground that the ruling upon which we appealed does not fully resolve all claims in the
action. As a result of the First Department’s June 2011 ruling, during the year ended December 31, 2011, we
recorded $24 million of “Litigation Expense” on our Consolidated Statements of Operations and Comprehensive
Income (Loss) and increased our “Litigation accrual” to a total of $66 million as of December 31, 2011. This
reflects our estimated exposure for ESPN’s counterclaim. On February 6, 2012, ESPN filed a motion seeking $5
million in attorneys’ fees as the prevailing party on both our claim and ESPN’s counterclaim, which we intend to
oppose. We intend to vigorously prosecute and defend this case.
Ganas, L.L.C.
During August 2010, Ganas, L.L.C. (“Ganas”) filed suit against DISH DBS Corporation, our indirect wholly owned
subsidiary, Sabre Holdings Corporation, SAP America, Inc., SAS Institute Inc., Scottrade, Inc., TD Ameritrade, Inc.,
The Charles Schwab Corporation, TiVo Inc., Unicoi Systems Inc., Xerox Corporation, Adobe Systems Inc., AOL
Inc., Apple Inc., Axibase Corporation, DirecTV, E*Trade Securities L.L.C., Exinda Networks, Fidelity Brokerage
Services L.L.C., Firstrade Securities Inc., Hewlett-Packard Company, iControl Inc., International Business
Machines Corporation and JPMorgan Chase & Co. in the United States District Court for the Eastern District of
Texas alleging infringement of United States Patent Nos. 7,136,913, 7,325,053, and 7,734,756. The patents relate to
hypertext transfer protocol and simple object access protocol. Ganas is an entity that seeks to license an acquired
patent portfolio without itself practicing any of the claims recited therein. On January 23, 2012, Ganas dismissed
the case against us with prejudice pursuant to a settlement in which our contribution was not material.