Dish Network 2013 Annual Report Download - page 185

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-75
related expense from April 1, 2011 through July 31, 2018, the expiration date of the ‘389 patent. In connection with
our TiVo settlement, TiVo agreed to advertise and market certain of our products and services. As a result, during
2011, $6 million was recognized as a reduction of litigation expense and we recorded a pre-paid marketing asset on
our Consolidated Statements of Operations and Comprehensive Income (Loss) and our Consolidated Balance
Sheets, respectively, which is being amortized as costs of sales over the term of the agreement.
In addition, under the settlement agreement, TiVo granted us a license under its ‘389 patent and certain related
patents, for the remaining life of those patents, with respect to DISH-branded and co-branded products and services.
We and EchoStar, on the one hand, and TiVo, on the other hand, also agreed on mutual releases of certain related
claims and agreed not to challenge each other’s DVR technology-related patents that are licensed under the settlement
agreement.
Because both we and EchoStar were defendants in the TiVo lawsuit, we and EchoStar were jointly and severally liable
to TiVo for any final damages and sanctions that could have been awarded by the District Court. As previously
disclosed, we determined that we were obligated under the agreements entered into in connection with the Spin-off to
indemnify EchoStar for substantially all liability arising from this lawsuit. EchoStar contributed an amount equal to its
$5 million intellectual property liability limit under the receiver agreement. We and EchoStar further agreed that
EchoStar’s $5 million contribution would not exhaust EchoStar’s liability to us for other intellectual property claims
that may arise under the receiver agreement. We and EchoStar also agreed that we would each be entitled to joint
ownership of, and a cross-license to use, any intellectual property developed in connection with any potential new
alternative technology. Any amounts that EchoStar is responsible for under the settlement agreement with TiVo are in
addition to the $5 million contribution previously made by EchoStar.
Patent Cross-License Agreements. During December 2011, we and EchoStar entered into separate patent cross-
license agreements with the same third party whereby: (i) EchoStar and such third party licensed their respective
patents to each other subject to certain conditions; and (ii) we and such third party licensed our respective patents to
each other subject to certain conditions (each, a “Cross-License Agreement”). Each Cross License Agreement
covers patents acquired by the respective party prior to January 1, 2017 and aggregate payments under both Cross-
License Agreements total less than $10 million. Each Cross License Agreement also contains an option to extend
each Cross-License Agreement to include patents acquired by the respective party prior to January 1, 2022. If both
options are exercised, the aggregate additional payments to such third party would total less than $3 million.
However, we and EchoStar may elect to extend our respective Cross-License Agreement independently of each
other. Since the aggregate payments under both Cross-License Agreements were based on the combined annual
revenues of us and EchoStar, we and EchoStar agreed to allocate our respective payments to such third party based
on our respective percentage of combined total revenue.
Sprint Settlement Agreement. On November 3, 2011, we and Sprint entered into the Sprint Settlement Agreement
pursuant to which all disputed issues relating to the DBSD Transaction and the TerreStar Transaction were resolved
between us and Sprint, including, but not limited to, issues relating to the costs allegedly incurred by Sprint to
relocate users from the spectrum then licensed to DBSD North America and TerreStar (the “Sprint Clearing Costs”).
EchoStar was a party to the Sprint Settlement Agreement solely for the purposes of executing a mutual release
between it and Sprint relating to the Sprint Clearing Costs. EchoStar was a holder of certain TerreStar debt
instruments. In March 2012, EchoStar’s remaining debt instruments were exchanged for a right to receive a
distribution in accordance with the terms of the liquidating trust established pursuant to TerreStar’s chapter 11 plan
of liquidation. Pursuant to the terms of the Sprint Settlement Agreement, we made a net payment of approximately
$114 million to Sprint.
Hughes Broadband Distribution Agreement. Effective October 1, 2012, dishNET Satellite Broadband L.L.C.
(“dishNET Satellite Broadband”), our wholly-owned subsidiary, and HNS entered into a Distribution Agreement
(the “Distribution Agreement”) pursuant to which dishNET Satellite Broadband has the right, but not the obligation,
to market, sell and distribute the HNS satellite Internet service (the “Service”). dishNET Satellite Broadband pays
HNS a monthly per subscriber wholesale service fee for the Service based upon the subscriber’s service level, and,
beginning January 1, 2014, certain volume subscription thresholds. The Distribution Agreement also provides that
dishNET Satellite Broadband has the right, but not the obligation, to purchase certain broadband equipment from