Dish Network 2008 Annual Report Download - page 128

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-46
Purchase Obligations
Our 2009 purchase obligations primarily consist of binding purchase orders for receiver systems and
related equipment, digital broadcast operations, satellite and transponder leases, engineering and for products
and services related to the operation of our DISH Network. Our purchase obligations also include certain
guaranteed fixed contractual commitments to purchase programming content. Our purchase obligations
can fluctuate significantly from period to period due to, among other things, management’s control of
inventory levels, and can materially impact our future operating asset and liability balances, and our future
working capital requirements.
Programming Contracts
In the normal course of business, we enter into contracts to purchase programming content in which our
payment obligations are fully contingent on the number of subscribers to whom we provide the respective
content. These programming commitments are not included in the table above. The terms of our contracts
typically range from one to ten years with annual rate increases. Our programming expenses will continue
to increase to the extent we are successful growing our subscriber base. In addition, our margins may face
further downward pressure from price escalations in current contracts and the renewal of long term
programming contracts on less favorable pricing terms.
Rent Expense
Total rent expense for operating leases approximated $204 million, $75 million and $69 million in 2008,
2007 and 2006, respectively. The increase in rent expense from 2007 to 2008 primarily resulted from costs
associated with satellite and transponder capacity leases on satellites that were distributed to EchoStar in
connection with the Spin-off.
Patents and Intellectual Property
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. We may not be aware of all patents and other intellectual property rights that our products may
potentially infringe. Damages in patent infringement cases can include a tripling of actual damages in certain
cases. Further, 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. 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.
Contingencies
Separation Agreement
In connection with the Spin-off, we entered into a separation agreement with EchoStar, which provides for,
among other things, the division of liability resulting from litigation. Under the terms of the separation
agreement, EchoStar has assumed liability for any acts or omissions that relate to its business whether such
acts or omissions occurred before or after the Spin-off. Certain exceptions are provided, including for
intellectual property related claims generally, whereby EchoStar will only be liable for its acts or omissions
that occurred following the Spin-off. Therefore, we have indemnified EchoStar for any potential liability or
damages resulting from intellectual property claims relating to the period prior to the effective date of the
Spin-off.