Dish Network 2015 Annual Report Download - page 58

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of our directors and to control all other matters requiring the approval of our stockholders. As a result, DISH Network is
a “controlled company” as defined in the Nasdaq listing rules and is, therefore, not subject to Nasdaq requirements that
would otherwise require us to have: (i) a majority of independent directors; (ii) a nominating committee composed
solely of independent directors; (iii) compensation of our executive officers determined by a majority of the independent
directors or a compensation committee composed solely of independent directors; and (iv) director nominees selected, or
recommended for the Board’s selection, either by a majority of the independent directors or a nominating committee
composed solely of independent directors. Mr. Ergen is also the principal stockholder and Chairman of EchoStar.
Legal and Regulatory Risks
A ruling in the Do Not Call litigation requiring us to pay substantial civil penalties and/or damages and/or enjoining
us, whether acting directly or indirectly through authorized telemarketers or independent third-party retailers, from
certain activities could have a material adverse effect on our results of operations, financial condition and cash flow.
On March 25, 2009, our wholly-owned subsidiary DISH Network L.L.C. was sued in a civil action by the United States
Attorney General and several states in the United States District Court for the Central District of Illinois, alleging
violations of the Telephone Consumer Protection Act and the Telemarketing Sales Rule, as well as analogous state
statutes and state consumer protection laws. The plaintiffs allege that we, directly and through certain independent third-
party retailers and their affiliates, committed certain telemarketing violations. On December 23, 2013, the plaintiffs filed
a motion for summary judgment, which indicated for the first time that the state plaintiffs were seeking civil penalties
and damages of approximately $270 million and that the federal plaintiff was seeking an unspecified amount of civil
penalties (which could substantially exceed the civil penalties and damages being sought by the state plaintiffs). The
plaintiffs are also seeking injunctive relief that if granted would, among other things, enjoin DISH Network L.L.C.,
whether acting directly or indirectly through authorized telemarketers or independent third-party retailers, from placing
any outbound telemarketing calls to market or promote its goods or services for five years, and enjoin DISH Network
L.L.C. from accepting activations or sales from certain existing independent third-party retailers and from certain new
independent third-party retailers, except under certain circumstances. We also filed a motion for summary judgment,
seeking dismissal of all claims. On December 12, 2014, the Court issued its opinion with respect to the parties’
summary judgment motions. The Court found that DISH Network L.L.C. is entitled to partial summary judgment with
respect to one claim in the action. In addition, the Court found that the plaintiffs are entitled to partial summary
judgment with respect to ten claims in the action, which includes, among other things, findings by the Court establishing
DISH Network L.L.C.’s liability for a substantial amount of the alleged outbound telemarketing calls by DISH Network
L.L.C. and certain of its independent third-party retailers that were the subject of the plaintiffs’ motion. The Court did
not issue any injunctive relief and did not 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. In pre-trial
disclosures, the federal plaintiff indicated that it intends to seek up to $900 million in alleged civil penalties, and the state
plaintiffs indicated that they now intend to seek $23.5 billion in alleged civil penalties and damages. The first phase of
the bench trial took place January 19, 2016 through February 11, 2016. The Court will conduct a second phase of the
bench trial in October 2016, which we anticipate will cover the plaintiffs’ requested injunctive relief, as well as DISH
Network L.L.C.’s response to certain evidence presented by the plaintiffs in the first phase. A ruling requiring us to pay
substantial civil penalties and/or damages and/or enjoining us, whether acting directly or indirectly through authorized
telemarketers or independent third-party retailers, from the activities described above could have a material adverse
effect on our results of operations, financial condition and cash flow.
Our business depends on certain intellectual property rights and on not infringing the intellectual property rights of
others.
We rely on our patents, copyrights, trademarks and trade secrets, as well as licenses and other agreements with our
vendors and other parties, to use our technologies, conduct our operations and sell our products and services. Legal
challenges to our intellectual property rights and claims of intellectual property infringement by third parties could
require that we enter into royalty or licensing agreements on unfavorable terms, incur substantial monetary liability or be
enjoined preliminarily or permanently from further use of the intellectual property in question or from the continuation
of our business as currently conducted, which could require us to change our business practices or limit our ability to
compete effectively or could have an adverse effect on our results of operations. Even if we believe any such challenges