Time Warner Cable 2006 Annual Report Download - page 55

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On July 14, 2006, Hybrid Patents Inc. filed a complaint in the U.S. District Court for the Eastern District of
Texas alleging that TWC and a number of other cable operators infringe several patents purportedly relating to high-
speed data and Internet-based phone services. The plaintiff is seeking unspecified monetary damages as well as
injunctive relief. TWC intends to defend against the claim vigorously but is unable to predict the outcome of the suit
or reasonably estimate a range of possible loss.
On June 1, 2006, Rembrandt Technologies, LP filed a complaint in the U.S. District Court for the Eastern
District of Texas alleging that TWC and a number of other cable operators infringe several patents purportedly
related to a variety of technologies, including high-speed data and Internet-based phone services. In addition, on
September 13, 2006, Rembrandt Technologies, LP filed a complaint in the U.S. District Court for the Eastern
District of Texas alleging that TWC infringes several patents purportedly related to “high-speed cable modem
internet products and services.” In each of these cases, the plaintiff is seeking unspecified monetary damages as well
as injunctive relief. TWC intends to defend against this lawsuits vigorously. TWC 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
infringed a patent related to digital video recorder technology. TWC is working closely with its digital video
recorder 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 (“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,
VOD 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 multidistrict 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, TWC’s action was consolidated into the MDL
proceedings. The plaintiff is seeking unspecified monetary damages as well as injunctive relief. TWC intends to
defend against this lawsuit vigorously. TWC is unable to predict the outcome of this suit or reasonably estimate a
range of possible loss.
From time to time, TWC receives notices from third parties claiming that TWC 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 that TWC enters may
require TWC to indemnify the other party for certain third-party intellectual property infringement claims, which
could increase TWC’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
TWE’s former 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, TWC’s tax returns are subject to examination by various domestic taxing
authorities. Such examinations may result in future tax and interest assessments on TWC. In instances where TWC
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
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