Time Warner Cable 2009 Annual Report Download - page 107

Certain Patent Litigation
On September 1, 2006, Ronald A. Katz Technology Licensing, L.P. (“Katz”) filed a complaint in the U.S. District Court for the
District of Delaware alleging that TWC and several other cable operators, among other defendants, infringe 18 patents purportedly
relating to the Company’s customer call center operations and/or voicemail services. The plaintiff is seeking unspecified monetary
damages as well as injunctive relief. On March 20, 2007, this case, together with other lawsuits filed by Katz, was made subject to a
Multidistrict Litigation (“MDL”) Order transferring the case for pretrial proceedings to the U.S. District Court for the Central District of
California. In April 2008, TWC and other defendants filed “common” motions for summary judgment, which argued, among other
things, that a number of claims in the patents at issue are invalid under Sections 112 and 103 of the Patent Act. On June 19 and August 4,
2008, the court issued orders granting, in part, and denying, in part, those motions. Defendants filed additional individual motions for
summary judgment in August 2008, which argued, among other things, that defendants’ respective products do not infringe the surviving
claims in plaintiff’s patents. On August 13, 2009, the district court found one additional patent invalid, but denied defendants’ motions
for summary judgment on three remaining patents, and on October 27, 2009, the district court denied the defendants’ requests for
reconsideration of the decision. On January 29, 2010, the district court found one of the three remaining patents invalid based on a motion
for summary judgment brought by another defendant. The Company intends to defend against this lawsuit vigorously.
On June 1, 2006, Rembrandt Technologies, LP (“Rembrandt”) filed a complaint in the U.S. District Court for the Eastern District of
Texas alleging that the Company and a number of other cable operators infringed several patents purportedly related to a variety of
technologies, including high-speed data and IP-based telephony services. In addition, on September 13, 2006, Rembrandt filed a
complaint in the U.S. District Court for the Eastern District of Texas alleging that the Company infringes several patents purportedly
related to “high-speed cable modem internet products and services.” On June 18, 2007, these cases, along with other lawsuits filed by
Rembrandt, were made subject to an MDL Order transferring the case for pretrial proceedings to the U.S. District Court for the District of
Delaware. In November 2008, the district court issued its claims construction orders. In response to these orders, the plaintiff has
indicated it will dismiss its claims relating to the alleged infringement of eight patents purportedly relating to high-speed data and
IP-based telephony services. The plaintiff has not indicated that it will dismiss its claim relating to one remaining patent alleged to relate
to digital video decoder technology and summary judgment motions are pending relating to the remaining claim. The Company intends
to defend against the remaining claim vigorously.
On April 26, 2005, Acacia Media Technologies (“AMT”) filed suit against TWC in the 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 an 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. On September 25, 2009, the district court ruled on the Company’s
summary judgment motions finding all AMT patents invalid and, on February 2, 2010, AMT filed its notice of appeal to this decision.
The Company will defend against this lawsuit vigorously.
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 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.
The costs and other effects of pending or future litigation, governmental investigations, legal and administrative 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)