Dish Network 2004 Annual Report Download - page 119

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
In October 1998, we filed a declaratory judgment action against ABC, NBC, CBS and FOX in the United States
District Court for the District of Colorado. We asked the Court to find that our method of providing distant network
programming did not violate SHVIA and hence did not infringe the networks’ copyrights. In November 1998, the
networks and their affiliate association groups filed a complaint against us in Miami Federal Court alleging, among
other things, copyright infringement. The Court combined the case that we filed in Colorado with the case in Miami
and transferred it to the Miami Federal Court.
In February 1999, the networks filed a Motion for Temporary Restraining Order, Preliminary Injunction and Contempt
Finding against DirecTV, Inc. in Miami related to the delivery of distant network channels to DirecTV customers by
satellite. DirecTV settled that lawsuit with the networks. Under the terms of the settlement between DirecTV and the
networks, some DirecTV customers were scheduled to lose access to their satellite-provided distant network channels
by July 31, 1999, while other DirecTV customers were to be disconnected by December 31, 1999. Subsequently,
substantially all providers of satellite-delivered network programming other than us agreed to this cut-off schedule,
although we do not know if they adhered to this schedule.
In April 2002, we reached a private settlement with ABC, Inc., one of the plaintiffs in the litigation, and jointly filed
a stipulation of dismissal. In November 2002, we reached a private settlement with NBC, another of the plaintiffs in
the litigation and jointly filed a stipulation of dismissal. On March 10, 2004, we reached a private settlement with
CBS, another of the plaintiffs in the litigation and jointly filed a stipulation of dismissal. We have also reached
private settlements with many independent stations and station groups. We were unable to reach a settlement with
five of the original eight plaintiffs – Fox and the independent affiliate groups associated with each of the four
networks.
A trial took place during April 2003 and the District Court issued a final judgment in June 2003. The District Court
found that with one exception our current distant network qualification procedures comply with the law. We have
revised our procedures to comply with the District Court’s Order. Although the plaintiffs asked the District Court to
enter an injunction precluding us from selling any local or distant network programming, the District Court refused.
While the plaintiffs did not claim monetary damages and none were awarded, the plaintiffs were awarded
approximately $4.8 million in attorneys’ fees. This amount is substantially less than the amount the plaintiffs
sought. We ask the Court to reconsider the award and the Court has vacated the fee award. When the award was
vacated, the District Court also allowed us an opportunity to conduct discovery concerning the amount of plaintiffs’
requested fees. The parties have agreed to postpone discovery and an evidentiary hearing regarding attorney’s fees
until after the Court of Appeals rules on the pending appeal of the Court’s June 2003 final judgment. It is not
possible to make a firm assessment of the probable outcome of plaintiffs’ outstanding request for fees.
The District Court’s injunction requires us to use a computer model to re-qualify, as of June 2003, all of our
subscribers who receive ABC, NBC, CBS or Fox programming by satellite from a market other than the city in
which the subscriber lives. The Court also invalidated all waivers historically provided by network stations. These
waivers, which have been provided by stations for the past several years through a third party automated system,
allow subscribers who believe the computer model improperly disqualified them for distant network channels to
nonetheless receive those channels by satellite. Further, even though SHVIA provides that certain subscribers who
received distant network channels prior to October 1999 can continue to receive those channels through December
2004, the District Court terminated the right of our grandfathered subscribers to continue to receive distant network
channels.
We believe the District Court made a number of errors and appealed the decision. Plaintiffs cross-appealed. The
Court of Appeals granted our request to stay the injunction until our appeal is decided. Oral arguments occurred
during February 2004. It is not possible to predict how or when the Court of Appeals will rule on the merits of our
appeal.
F–39