XM Radio 2008 Annual Report Download - page 93

the agency’s decision to enter into a consent decree is not reviewable by the court in these circumstances.
Separately, the court issued a show cause order on its own motion that requires U.S. Electronics to demonstrate why
its additional notice of appeal should not be dismissed as untimely. In January 2009, the court dismissed the appeals
of both U.S. Electronics and Michael Hartleib.
Copyright Royalty Board Proceeding. In January 2008, the Copyright Royalty Board, or CRB, of the Library
of Congress issued its decision regarding the royalty rate payable by XM and SIRIUS under the statutory license
covering the performance of sound recordings over their satellite digital audio radio services for the six-year period
starting January 1, 2007 and ending December 31, 2012. Under the terms of the CRB’s decision, we paid a royalty of
6.0% of gross revenues, subject to certain exclusions, for 2007 and 2008, we will pay 6.5% for 2009, 7.0% for 2010,
7.5% for 2011 and 8.0% for 2012. SoundExchange has appealed the decision of the CRB to the United States Court
of Appeals for the District of Columbia Circuit. Final briefs in this matter were submitted to the United States Court
of Appeals for the District of Columbia Circuit in February 2009 and oral argument is scheduled for March 2009.
U.S. Electronics Arbitration. In May 2006, U.S. Electronics Inc., a former licensed distributor and man-
ufacturer of SIRIUS radios, commenced an arbitration proceeding against SIRIUS. U.S. Electronics alleged that
SIRIUS breached its contract; failed to pay monies owed under the contract; tortiously interfered with
U.S. Electronics’ relationships with retailers and manufacturers; and otherwise acted in bad faith. U.S. Electronics
sought up to $133 million in damages. In August 2008, following a 20-day arbitration hearing, a panel of three
arbitrators unanimously issued a 149-page Final Award dismissing with prejudice all of U.S. Electronics’ claims,
including its claims for lost profits. U.S. Electronics has filed suit in the United States District Court for the
Southern District of New York seeking to vacate the decision of the arbitrators.
Atlantic Recording Corporation, BMG Music, Capital Records, Inc., Elektra Entertainment Group Inc.,
Interscope Records, Motown Record Company, L.P., Sony BMG Music Entertainment, UMG Recordings, Inc.,
Virgin Records, Inc. and Warner Bros. Records Inc. v. XM Satellite Radio Inc. In May 2006, the plaintiffs filed this
action in the United States District Court for the Southern District of New York. The complaint seeks monetary
damages and equitable relief, and alleges that XM radios that include advanced recording functionality infringe
upon plaintiffs’ copyrighted sound recordings. XM filed a motion to dismiss this matter, and that motion was denied
in January 2007. XM has resolved the lawsuit with respect to Universal Music Group, Warner Music Group,
Sony BMG Music Entertainment and EMI Group, and each of these parties has withdrawn as a party to the lawsuit
and this lawsuit has been dismissed with respect to such parties.
Music publishing companies and certain other record companies also have filed lawsuits, purportedly on a
class basis, with similar allegations. We believe these allegations are without merit and that our products comply
with applicable copyright law, including the Audio Home Recording Act. We intend to vigorously defend this
matter. There can be no assurance regarding the ultimate outcome of these matters, or the significance, if any, to our
business, consolidated results of operations or financial position.
Matthew Enderlin v. XM Satellite Radio Holdings Inc. and XM Satellite Radio Inc. In January 2006, the
plaintiff filed this action in the United States District Court for the Eastern District of Arkansas on behalf of a
purported nationwide class of all XM subscribers. The complaint alleges that XM engaged in a deceptive trade
practices under Arkansas and other state laws by representing that its music channels are commercial-free. The
court stayed the litigation and directed the parties to arbitration. XM instituted arbitration with the American
Arbitration Association pursuant to the compulsory arbitration clause in its customer service agreement. The
plaintiff has filed a counterclaim in the arbitration on behalf of the class that he seeks to represent. We believe this
matter is without merit and intend to vigorously defend the ongoing arbitration. There can be no assurance regarding
the ultimate outcome of this matter, or the significance, if any, to our business, consolidated results of operations or
financial position.
Other Matters. In the ordinary course of business, we are a defendant in various lawsuits and arbitration
proceedings, including actions filed by former employees, parties to contracts or leases and owners of patents,
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SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)