Dish Network 2015 Annual Report Download - page 182

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-78
certain related transactions. In such case, EchoStar is solely liable for, and will indemnify us for, any resulting
taxes, as well as any losses, claims and expenses. The tax sharing agreement will only terminate after the later of
the full period of all applicable statutes of limitations, including extensions, or once all rights and obligations are
fully effectuated or performed.
In light of the tax sharing agreement, among other things, and in connection with our consolidated federal income
tax returns for certain tax years prior to and for the year of the Spin-off, during the third quarter 2013, we and
EchoStar agreed upon a supplemental allocation of the tax benefits arising from certain tax items resolved in the
course of the IRS’ examination of these consolidated tax returns. As a result, we agreed to pay EchoStar $83
million of the tax benefit we received or will receive. This resulted in a reduction of our recorded unrecognized tax
benefits and this amount was reclassified to a long-term payable to EchoStar within “Long-term deferred revenue,
distribution and carriage payments and other long-term liabilities” on our Consolidated Balance Sheets during the
third quarter 2013. Any payment to EchoStar, including accrued interest, will be made at such time as EchoStar
would have otherwise been able to realize such tax benefit. In addition, during the third quarter 2013, we and
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 2015 and 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. In addition, EchoStar earned and recognized tax benefits for certain
federal income tax credits, a portion of which were allocated to us under IRS rules for affiliated companies. We
expect to utilize these tax credits to reduce our federal and 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 $3 million and $5 million in “Additional paid-in capital” on our Consolidated Balance Sheets for the
years ended December 31, 2015 and 2014, respectively, 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.
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