Dish Network 2012 Annual Report Download - page 84

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
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On June 21, 2011, the First Department affirmed the New York State 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 2011, we recorded $24 million
of “Litigation Expense” on our Consolidated Statements of Operations and Comprehensive Income (Loss). On
October 11, 2012, the New York State Supreme Court awarded ESPN $5 million in attorneys’ fees as the prevailing
party on both our claim and ESPN’s counterclaim. As a result, we recorded $5 million of “General and
administrative expenses” and increased our “Litigation accrual” to a total of $71 million related to this case as of
December 31, 2012. This reflects our estimated exposure for ESPN’s counterclaim. We intend to vigorously
prosecute and defend this case.
The Hopper Litigation
On May 24, 2012, our wholly-owned subsidiary, DISH Network L.L.C., filed a lawsuit in the United States District
Court for the Southern District of New York against American Broadcasting Companies, Inc., CBS Corporation,
Fox Entertainment Group, Inc., Fox Television Holdings, Inc., Fox Cable Network Services, L.L.C. and
NBCUniversal. In the lawsuit, we are seeking a declaratory judgment that we are not infringing any defendant’s
copyright, or breaching any defendant’s retransmission consent agreement, by virtue of the PrimeTime Anytime™
and AutoHop™ features on our Hopper™ set-top box. The PrimeTime Anytime feature allows a user of our
Hopper set-top box, at his or her option, to record certain primetime programs airing on ABC, CBS, Fox, and/or
NBC up to every night, and to store those recordings for up to eight days. The AutoHop feature allows a
subscriber, at his or her option, to watch certain recordings the subscriber made with our PrimeTime Anytime
feature, commercial-free, if played back the next day after the show’s original airing.
Later on May 24, 2012, (i) Fox Broadcasting Company, Twentieth Century Fox Film Corp. and Fox Television
Holdings, Inc. filed a lawsuit against us and DISH Network L.L.C. in the United States District Court for the
Central District of California, alleging that the PrimeTime Anytime feature, the AutoHop feature, as well as Sling
place-shifting functionality infringe their copyrights and breach their retransmission consent agreements, (ii) NBC
Studios LLC, Universal Network Television, LLC, Open 4 Business Productions LLC and NBCUniversal filed a
lawsuit against us and DISH Network L.L.C. in the United States District Court for the Central District of
California, alleging that the PrimeTime Anytime feature and the AutoHop feature infringe their copyrights, and (iii)
CBS Broadcasting Inc., CBS Studios Inc. and Survivor Productions LLC filed a lawsuit against us and DISH
Network L.L.C. in the United States District Court for the Central District of California, alleging that the PrimeTime
Anytime feature and the AutoHop feature infringe their copyrights. The Central District of California matters have
been assigned to a single judge.
As a result of certain parties’ competing venue-related motions brought in both the New York and California
actions, and certain networks’ filing various counterclaims and amended complaints, the claims are presently
pending in the following venues: (1) the copyright and contract claims regarding the ABC parties are pending in
New York; (2) the copyright and contract claims regarding the CBS parties are pending in New York; (3) the
copyright and contract claims regarding the Fox parties are pending in California; and (4) the copyright claims
regarding the NBC parties are pending in California, while the contract claims involving the NBC parties are
pending in both New York and California. A venue-related motion is still pending in the NBC action in New York.
The NBC plaintiffs have filed an amended complaint in their California action adding copyright claims against
EchoStar and EchoStar Technologies L.L.C. (“EchoStar Technologies”), a wholly-owned subsidiary of EchoStar.
Additionally, both the ABC and CBS parties have filed counterclaims in the New York action adding copyright
claims against EchoStar Technologies, and the CBS parties have filed a counterclaim alleging that we fraudulently
concealed the AutoHop feature when negotiating renewal of the CBS retransmission consent agreement.
DISH NETWORK CORPORATION
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On September 21, 2012, the California court heard the Fox plaintiffs’ motion for a preliminary injunction to enjoin
the Hopper set-top box’s PrimeTime Anytime and AutoHop features and, on November 7, 2012, entered an order
denying the motion. The Fox plaintiffs have appealed. On November 23, 2012, the ABC plaintiffs filed a motion
in the New York action for a preliminary injunction to enjoin the Hopper set-top box’s PrimeTime Anytime and
AutoHop features, and we and the ABC plaintiffs have filed briefs related to that motion.
We intend to vigorously prosecute and defend our position in these cases. In the event that a court ultimately
determines that we infringe the asserted copyrights, we may be subject to substantial damages, and/or an injunction
that could require us to materially modify certain features that we currently offer to consumers. In addition, as a
result of this litigation, we may not be able to renew certain of our retransmission consent agreements and other
programming agreements on favorable terms or at all. If we are unable to renew these agreements, there can be no
assurance that we would be able to obtain substitute programming, or that such substitute programming would be
comparable in quality or cost to our existing programming. Loss of access to existing programming could have a
material adverse effect on our business, financial condition and results of operations, including, among other things,
our gross new subscriber activations and subscriber churn rate. We cannot predict with any degree of certainty the
outcome of these suits or determine the extent of any potential liability or damages.
Norman IP Holdings, Inc.
On September 15, 2011, Norman IP Holdings, Inc. (“Norman”) filed a patent infringement complaint against
Brother International Corporation and Lexmark International Corporation in the United States District Court for the
Eastern District of Texas alleging infringement of U.S. Patent No. 5,592,555 (the “555 patent”) and U.S. Patent No.
5,502,689 (the “689 patent”). On December 9, 2011, Norman filed a first amended complaint that added Ricoh
Americas Corporation and dropped Brother International Corporation as a defendant. On January 27, 2012,
Norman filed a second amended complaint that added us as a defendant, in addition to adding Belkin International,
Inc., BMW of North America LLC, Daimler North America Corporation, Mercedes-Benz USA, LLC, D-Link
Systems, Inc., Ford Motor Company, Garmin International, Inc., Garmin USA, Inc., General Electric Company,
General Motors Company, JVC Americas Corporation, Novatel Wireless, Inc., Novatel Wireless Solutions, Inc.,
Novatel Wireless Technology, Inc., TomTom, Inc., ViewSonic Corporation, Vizio, Inc., Volkswagen Group of
America, Inc., Xerox Corporation, ZTE USA, Inc., and ZTE Solutions, Inc. On February 8, 2013, Norman filed a
third amended complaint that added claims against us alleging infringement of U.S. Patent No. 5,530,597 (the “597
patent”) and that dropped as defendants Ford Motor Company, General Electric Company, JVC Americas
Corporation, Novatel Wireless Solutions, Inc., Novatel Wireless Technology, Inc., and TomTom, Inc.
The 555 patent relates to a wireless communications privacy method and system, the 689 patent relates to a clock
generator capable of shut-down mode and clock generation method, and the 597 patent relates to an interrupt enable
circuit that allows devices to exit processes without using a hardware reset. Norman is an entity that seeks to
license an acquired patent portfolio without itself practicing any of the claims recited therein. The trial date has
been set for January 5, 2015.
We intend to vigorously defend this case. In the event that a court ultimately determines that we infringe any of the
asserted patents, we may be subject to substantial damages, which may include treble damages, and/or an injunction
that could cause 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.
NorthPoint Technology, Ltd.
On July 2, 2009, NorthPoint Technology, Ltd. (“NorthPoint”) filed suit against us, EchoStar and DirecTV in the
United States District Court for the Western District of Texas alleging infringement of United States Patent No.
6,208,636 (the “636 patent”). The 636 patent relates to the use of multiple low-noise block converter feedhorns, or
LNBFs, which are antennas used for satellite reception. On April 21, 2011, the U.S. Patent and Trademark Office
issued an order granting reexamination of the 636 patent. On June 21, 2011, the District Court entered summary
judgment in our favor, finding that all asserted claims of the 636 patent are invalid. NorthPoint appealed and, on