Dish Network 2014 Annual Report Download - page 160

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-54
make any determination on civil penalties or damages, ruling instead that the scope of any injunctive relief and the
amount of any civil penalties or damages are questions for trial. Trial is scheduled to commence on July 21, 2015.
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.
Dragon Intellectual Property, LLC
On December 20, 2013, Dragon Intellectual Property, LLC (“Dragon IP”) filed complaints against our wholly-
owned subsidiary DISH Network L.L.C., as well as Apple Inc.; AT&T, Inc.; Charter Communications, Inc.;
Comcast Corp.; Cox Communications, Inc.; DirecTV; Sirius XM Radio Inc.; Time Warner Cable Inc. and Verizon
Communications, Inc., in the United States District Court for the District of Delaware, alleging infringement of
United States Patent No. 5,930,444 (the “444 patent”), which is entitled “Simultaneous Recording and Playback
Apparatus.” Dragon IP alleges that various of our DVR receivers infringe the 444 patent. Dragon IP is an entity
that seeks to license an acquired patent portfolio without itself practicing any of the claims recited therein. On
December 23, 2014, DISH Network L.L.C. filed a petition before the United States Patent and Trademark Office
challenging the validity of the 444 patent.
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, our wholly-owned subsidiary DISH Network L.L.C. 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 alleged that ESPN failed to provide us
with certain HD feeds of the Disney Channel, ESPN News, Toon and ABC Family. In October 2011, the jury
returned a verdict in favor of the defendants, which the New York State Supreme Court, Appellate Division, First
Department (the “First Department”) affirmed on April 2, 2013. We sought leave to further appeal, which the New
York Court of Appeals denied on August 27, 2013 on jurisdictional grounds. On September 19, 2013, we appealed
the trial court’s final judgment to the First Department. On March 6, 2014, pursuant to a settlement and release
agreement between the parties, we dismissed our 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 were liable for some of the amount alleged to be owing but that the
actual amount owing was disputed. On December 29, 2010, the First Department affirmed the partial grant of
ESPN’s motion for summary judgment 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 ruled that we owed the full amount of approximately $66 million under the
applicable affiliation agreements. 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 State Supreme Court’s ruling that we owed
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 did not fully resolve all
claims in the action. As a result of the First Department’s June 2011 ruling, we recorded $24 million of “Litigation
Expense” on our Consolidated Statements of Operations and Comprehensive Income (Loss) during 2011. On