Dish Network 2010 Annual Report Download - page 41

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34
34
ESPN
During 2008, we filed a lawsuit against ESPN, Inc., ESPN Classic, Inc., ABC Cable Networks Group, Soapnet
L.L.C. and International Family Entertainment (collectively, “ESPN”) for breach of contract in New York State
Supreme Court. Our complaint alleges that ESPN failed to provide us with certain high-definition feeds of the
Disney Channel, ESPN News, Toon and ABC Family. ESPN asserted a counterclaim, and then filed a motion for
summary judgment, alleging that we owed approximately $35 million under the applicable affiliation agreements.
We brought a motion to amend our complaint to assert that ESPN was in breach of certain most-favored-nation
provisions under the applicable affiliation agreements. On April 15, 2009, the New York State Supreme Court
granted our motion to amend the complaint, and granted, in part, ESPN’s motion on the counterclaim, finding that
we are liable for some of the amount alleged to be owing but that the actual amount owing is disputed. We appealed
the partial grant of ESPN’s motion to the New York State Supreme Court, Appellate Division, First Department.
After the partial grant of ESPN’s motion, ESPN sought an additional $30 million under the applicable affiliation
agreements. On March 15, 2010, the New York State Supreme Court affirmed the prior grant of ESPN’s motion
and ruled that we owe the full amount of approximately $65 million under the applicable affiliation agreement.
There can be no assurance that ESPN will not seek, and that the New York State Supreme Court, Appellate
Division, First Department will not award a higher amount. On December 29, 2010, the New York State Supreme
Court, Appellate Division, First Department affirmed the partial grant of ESPN’s motion on the counterclaim.
However, it did not rule on the amount that we owe ESPN pursuant to its counterclaim. The appellate court will
determine this amount as part of a separate proceeding. For the year ended December 31, 2010, we recorded $42
million as a “Litigation accrual” on our Consolidated Balance Sheets and in “Litigation expense” on our
Consolidated Statements of Operations and Comprehensive Income (Loss), which reflects our estimated exposure
for ESPN’s counterclaim. We intend to vigorously prosecute and defend this case.
Finisar Corporation
Finisar Corporation (“Finisar”) obtained a $100 million verdict in the United States District Court for the Eastern
District of Texas against DirecTV for patent infringement. Finisar, an entity that seeks to license an acquired patent
portfolio without itself practicing any of the claims recited therein, alleged that DirecTV’s electronic program guide
and other elements of its system infringe United States Patent No. 5,404,505 (the ‘505 patent).
During 2006, we and EchoStar, together with NagraStar L.L.C., filed a Complaint for Declaratory Judgment in the
United States District Court for the District of Delaware against Finisar that asks the Court to declare that we do not
infringe, and have not infringed, any valid claim of the ‘505 patent. Finisar brought counterclaims against us,
EchoStar and NagraStar alleging that we infringed the ‘505 patent. During April 2008, the Federal Circuit reversed
the judgment against DirecTV and ordered a new trial. On remand, the District Court granted summary judgment in
favor of DirecTV and during January 2010, the Federal Circuit affirmed the District Court’s grant of summary
judgment, and dismissed the action with prejudice. Finisar then agreed to dismiss its counterclaims against us,
EchoStar and NagraStar without prejudice. We also agreed to dismiss our Declaratory Judgment action without
prejudice.
Ganas L.L.C.
During August 2010, Ganas, L.L.C. (“Ganas”) filed suit against DISH DBS Corporation, our indirect wholly owned
subsidiary, Sabre Holdings Corporation, SAP America, Inc., SAS Institute Inc., Scottrade, Inc., TD Ameritrade, Inc.,
The Charles Schwab Corporation, Tivo Inc., Unicoi Systems Inc., Xerox Corporation, Adobe Systems Inc., AOL
Inc., Apple Inc., Axibase Corporation, DirecTV, E*Trade Securities L.L.C., Exinda Networks, Fidelity Brokerage
Services L.L.C., Firstrade Securities Inc., Hewlett-Packard Company, iControl Inc., International Business
Machines Corporation and JPMorgan Chase & Co. in the United States District Court for the Eastern District of
Texas alleging infringement of United States Patent Nos. 7,136,913, 7,325,053, and 7,734,756. The patents relate
to hypertext transfer protocol and simple object access protocol. Ganas is an entity that seeks to license an acquired
patent portfolio without itself practicing any of the claims recited therein.