Dish Network 1999 Annual Report Download - page 21

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In February 1999, CBS, NBC, Fox and ABC filed a “Motion for Temporary Restraining Order, Preliminary
Injunction and Contempt Finding” against DirecTV in Miami related to the delivery of distant network channels to
DirecTV customers by satellite. Under the terms of a settlement between DirecTV and the networks, some DirecTV
customers were scheduled to lose access to their satellite-provided network channels by July 31, 1999, while other
DirecTV customers were to be disconnected by December 31, 1999. Subsequently, PrimeTime 24 and substantially
all providers of satellite-delivered network programming other than us agreed to this cut-off schedule.
The networks are pursuing a Motion for Preliminary Injunction in the Miami Court, asking the court to
enjoin us from providing network programming except under very limited circumstances. In general, the networks
want us to turn off programming to our customers on the same schedule agreed to by DirecTV.
A preliminary injunction hearing was held during September 1999. The Court took the issues under
advisement to consider the networks’ request for an injunction, whether to hear live testimony before ruling upon the
request, and whether to hear argument on why the Satellite Home Viewer Act may be unconstitutional, among other
things. The Court did not say when a decision will be made, or whether an additional hearing will be necessary prior
to ruling upon the networks’ preliminary injunction motion.
If this case is decided against us, or a preliminary injunction is issued, significant material restrictions on the
sale of distant ABC, NBC, CBS and Fox channels by us could result, including potentially a nationwide permanent
prohibition on our broadcast of ABC, NBC, CBS and Fox network channels by satellite. The litigation and the new
legislation discussed above, among other things, could also require us to terminate delivery of network signals to a
material portion of our subscriber base, which could cause many of these subscribers to cancel their subscription to
our other services. While the networks have not sought monetary damages, they have sought to recover attorney fees
if they prevail. We have sent letters to some of our subscribers warning that their access to distant broadcast network
channels might be terminated soon and have already terminated ABC, NBC, CBS and Fox programming to many
customers.
PATENTS AND TRADEMARKS
Many entities, including some of our competitors, now have and may in the future obtain patents and other
intellectual property rights that cover or affect products or services directly or indirectly related to those that we offer.
In general, if a court determines that one or more of our products infringes on intellectual property held by others, we
would be required to cease developing or marketing those products, to obtain licenses to develop and market those
products from the holders of the intellectual property, or to redesign those products in such a way as to avoid
infringing the patent claims. If a competitor holds intellectual property rights, the entity might be predisposed to
exercise its right to prohibit our use of its intellectual property in our products and services at any price, thus
impacting our competitive position.
We cannot assure you that we are aware of all patents and other intellectual property rights that our products
may potentially infringe. In addition, patent applications in the United States are confidential until the Patent and
Trademark Office issues a patent and, accordingly, we cannot evaluate the extent to which our products may infringe
claims contained in pending patent applications. Further, it is often not possible to determine definitively whether a
claim of infringement is valid, absent protracted litigation.
We cannot estimate the extent to which we may be required in the future to obtain licenses with respect to
patents held by others and the availability and cost of any such licenses. Those costs, and their impact on net income,
could be material. Damages in patent infringement cases can also include a tripling of actual damages in certain
cases. To the extent that we are required to pay royalties to third parties to whom we are not currently making
payments, these increased costs of doing business could negatively affect our liquidity and operating results. Various
parties have asserted patent and other intellectual property rights with respect to components within our direct
broadcast satellite system. We cannot be certain that these persons do not own the rights they claim, that our products
do not infringe on these rights, that we would be able to obtain licenses from these persons on commercially
reasonable terms or, if we were unable to obtain such licenses, that we would be able to redesign our products to
avoid infringement.