Time Warner Cable 2006 Annual Report Download - page 148

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damages as well as injunctive relief. The Company intends to defend against these lawsuits vigorously, but is unable
to predict the outcome of these suits or reasonably estimate a range of possible loss.
On July 14, 2005, Forgent Networks, Inc. (“Forgent”) filed suit in the U.S. District Court for the Eastern
District of Texas alleging that TWC and a number of other cable operators and direct broadcast satellite operators
infringe a patent related to digital video recorder technology. TWC is working closely with its DVR equipment
vendors in defense of this matter, certain of whom have filed a declaratory judgment lawsuit against Forgent
alleging the patent cited by Forgent to be non-infringed, invalid and unenforceable. Forgent is seeking monetary
damages, ongoing royalties and injunctive relief in its suit against the Company. The Company intends to defend
against this lawsuit vigorously, but is unable to predict the outcome of this suit or reasonably estimate a range of
possible loss.
On April 26, 2005, Acacia Media Technologies Corporation (“AMT”) filed suit against TWC in U.S. District
Court for the Southern District of New York alleging that TWC infringes several patents held by AMT. AMT has
publicly taken the position that delivery of broadcast video (except live programming such as sporting events),
Pay-Per-View, Video-on-Demand and ad insertion services over cable systems infringe its patents. AMT has
brought similar actions regarding the same patents against numerous other entities, and all of the previously pending
litigations have been made the subject of a multi-district litigation (“MDL”) order consolidating the actions for
pretrial activity in the U.S. District Court for the Northern District of California. On October 25, 2005, the TWC
action was consolidated into the MDL proceedings. The plaintiff is seeking unspecified monetary damages as well
as injunctive relief. The Company intends to defend against this lawsuit vigorously, but is unable to predict the
outcome of this suit or reasonably estimate a range of possible loss.
From time to time, the Company receives notices from third parties claiming that it infringes their intellectual
property rights. Claims of intellectual property infringement could require TWC to 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. In addition, certain agreements entered into by the
Company may require the Company to indemnify the other party for certain third-party intellectual property
infringement claims, which could increase the Company’s damages and its costs of defending against such claims.
Even if the claims are without merit, defending against the claims can be time-consuming and costly.
As part of the TWE Restructuring, Time Warner agreed to indemnify the cable businesses of TWE from and
against any and all liabilities relating to, arising out of or resulting from specified litigation matters brought against
the TWE non-cable businesses. Although Time Warner has agreed to indemnify the cable businesses of TWE
against such liabilities, TWE remains a named party in certain litigation matters.
In the normal course of business, the Company’s tax returns are subject to examination by various domestic
taxing authorities. Such examinations may result in future tax and interest assessments on the Company. In
instances where the Company believes that a loss is probable, it has accrued a liability.
The costs and other effects of pending or future litigation, governmental investigations, legal and adminis-
trative cases and proceedings (whether civil or criminal), settlements, judgments and investigations, claims and
changes in those matters (including those matters described above), and developments or assertions by or against
the Company relating to intellectual property rights and intellectual property licenses, could have a material adverse
effect on the Company’s business, financial condition and operating results.
143
TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)