Dish Network 2014 Annual Report Download - page 180

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-74
EchoStar agreed upon a tax sharing arrangement for filing certain combined state income tax returns and a method
of allocating the respective tax liabilities between us and EchoStar for such combined returns, through the taxable
period ending on December 31, 2017.
We and EchoStar file combined income tax returns in certain states. In 2014, EchoStar earned and recognized a tax
benefit for certain state income tax credits that EchoStar estimates it would be unable to utilize in the future if it had
filed separately from us. We expect to utilize these tax credits to reduce our state income tax payable in the future.
In accordance with accounting rules that apply to transfers of assets between entities under common control, we
recorded a capital contribution of $5 million in “Additional paid-in capital” on our Consolidated Balance Sheets,
representing the amount that we estimate is more likely than not to be realized by us as a result of our utilization of
these tax credits earned . Any payments made to EchoStar related to the utilization of these credits will be recorded
as a reduction to “Additional paid-in capital” on our Consolidated Balance Sheets.
RUS Implementation Agreement. In September 2010, DISH Broadband L.L.C. (“DISH Broadband”), our wholly-
owned subsidiary, was selected by the Rural Utilities Service (“RUS”) of the United States Department of
Agriculture to receive up to approximately $14 million in broadband stimulus grant funds (the “Grant Funds”).
Effective November 2011, DISH Broadband and HNS entered into a RUS Implementation Agreement (the “RUS
Agreement”) pursuant to which HNS provided certain portions of the equipment and broadband service used to
implement our RUS program. The RUS Agreement expired during June 2013, when the Grant Funds were
exhausted. During the years ended December 31, 2013 and 2012, we expensed $3 million and $7 million,
respectively, under the RUS Agreement, which is included in “Cost of sales – equipment, services and other” on our
Consolidated Statements of Operations and Comprehensive Income (Loss).
TiVo. On April 29, 2011, we and EchoStar entered into a settlement agreement with TiVo Inc. (“TiVo”). The
settlement resolved all pending litigation between us and EchoStar, on the one hand, and TiVo, on the other hand,
including litigation relating to alleged patent infringement involving certain DISH digital video recorders, or DVRs.
Under the settlement agreement, all pending litigation was dismissed with prejudice and all injunctions that
permanently restrain, enjoin or compel any action by us or EchoStar were dissolved. We and EchoStar are jointly
responsible for making payments to TiVo in the aggregate amount of $500 million, including an initial payment of
$300 million and the remaining $200 million in six equal annual installments between 2012 and 2017. Pursuant to the
terms and conditions of the agreements entered into in connection with the Spin-off of EchoStar from us, we made the
initial payment to TiVo in May 2011, except for the contribution from EchoStar totaling approximately $10 million,
representing an allocation of liability relating to EchoStar’s sales of DVR-enabled receivers to an international
customer. Future payments will be allocated between us and EchoStar based on historical sales of certain licensed
products, with us being responsible for 95% of each annual payment.
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.
Hughes Broadband Distribution Agreement. Effective October 1, 2012, dishNET Satellite Broadband L.L.C.
(“dishNET Satellite Broadband”), our indirect 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