Dish Network 2010 Annual Report Download - page 130

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-45
Contingencies
In connection with the Spin-off, we entered into a separation agreement with EchoStar, which provides,
among other things, for the division of certain liabilities, including liabilities resulting from litigation.
Under the terms of the separation agreement, EchoStar has assumed certain liabilities that relate to its
business including certain designated liabilities for acts or omissions prior to the Spin-off. Certain specific
provisions govern intellectual property related claims under which, generally, EchoStar will only be liable
for its acts or omissions following the Spin-off and we will indemnify EchoStar for any liabilities or
damages resulting from intellectual property claims relating to the period prior to the Spin-off as well as
our acts or omissions following the Spin-off.
Acacia
During 2004, Acacia Media Technologies (“Acacia”) filed a lawsuit against us and EchoStar in the United
States District Court for the Northern District of California. The suit also named DirecTV, Comcast,
Charter, Cox and a number of smaller cable companies as defendants. Acacia is an entity that seeks to
license an acquired patent portfolio without itself practicing any of the claims recited therein. The suit
alleges infringement of United States Patent Nos. 5,132,992; 5,253,275; 5,550,863; 6,002,720; and
6,144,702, which relate to certain systems and methods for transmission of digital data. On September 25,
2009, the District Court granted summary judgment to the defendants on invalidity grounds, and dismissed
the action with prejudice. On October 8, 2010, the Federal Circuit Court of Appeals affirmed the
dismissal. Acacia may no longer appeal this dismissal since their time to seek en banc review with the
Federal Circuit Court of Appeals or petition the United States Supreme Court for certiorari has now
expired.
Broadcast Innovation, L.L.C.
During 2001, Broadcast Innovation, L.L.C. (“Broadcast Innovation”) filed a lawsuit against us, DirecTV,
Thomson Consumer Electronics and others in United States District Court in Denver, Colorado. Broadcast
Innovation is an entity that seeks to license an acquired patent portfolio without itself practicing any of the
claims recited therein. The suit alleges infringement of United States Patent Nos. 6,076,094 (the ‘094
patent) and 4,992,066 (the ‘066 patent). The ‘094 patent relates to certain methods and devices for
transmitting and receiving data along with specific formatting information for the data. The ‘066 patent
relates to certain methods and devices for providing the scrambling circuitry for a pay television system on
removable cards. Subsequently, DirecTV and Thomson settled with Broadcast Innovation leaving us as
the only defendant.
During 2004, the District Court issued an order finding the ‘066 patent invalid. Also in 2004, the District
Court found the ‘094 patent invalid in a parallel case filed by Broadcast Innovation against Charter and
Comcast. In 2005, the United States Court of Appeals for the Federal Circuit overturned that finding of
invalidity with respect to the ‘094 patent and remanded the Charter case back to the District Court. During
June 2006, Charter filed a reexamination request with the United States Patent and Trademark Office. The
District Court has stayed the Charter case pending reexamination, and our case has been stayed pending
resolution of the Charter case.
We intend to vigorously defend this case. In the event that a court ultimately determines that we infringe
any of the asserted patents, we may be subject to substantial damages, which may include treble damages,
and/or an injunction that could require us to materially modify certain user-friendly features that we
currently offer to consumers. We cannot predict with any degree of certainty the outcome of the suit or
determine the extent of any potential liability or damages.