This excerpt taken from the DTV 10-Q filed Aug 8, 2006.
On April 4, 2005, Finisar Corporation filed a patent infringement action in the United States District Court for the Eastern District of Texas (Beaumont) alleging that The DIRECTV Group, DIRECTV Holdings, DIRECTV Enterprises, LLC, DIRECTV Operations, LLC, DIRECTV, Inc., and DTV Network Systems, Inc. infringed U.S. Patent No. 5,404,505. On June 23, 2006, the jury determined that we willfully infringed this patent and awarded approximately $78.9 million in damages. On July 7, 2006, the Court entered its final written judgment which denied Finisar's request for an injunction and instead granted us a compulsory license. Under the license we would be obligated to pay Finisar $1.60 per new set-top box manufactured for use with the DIRECTV system beginning June 17, 2006 and continuing until the patent expires in 2012 or is otherwise found to be invalid. The Court also increased the damages award by $25 million because of the jury finding of willful infringement and awarded pre-judgment interest of $13.4 million to Finisar. Post-judgment interest accrues on the total judgment.
We have filed post-judgment motions with the trial court seeking judgment in our favor as a matter of law. If these motions are denied, we intend to file an appeal to the Court of Appeals for the Federal Circuit. We are required to post security for the damages awarded but not yet paid pending appeal plus interest for the anticipated duration of the appeal, and a bond has been submitted to the District Court in the amount of $126.7 million. We also intend to seek approval to make payments for the compulsory license into escrow during this period.
Based on our review of the record in this case, including discussion with and analysis by counsel, the merits of our post-judgment motions and the bases for our appeal, we have determined that we have a number of strong arguments available to challenge the outcome of this matter on appeal and, although there can be no assurance as to the ultimate outcome, we are confident that the judgment against us will ultimately be reversed, or remanded for a new trial in which we believe we would prevail. As a result, we have concluded that it is not probable that Finisar will ultimately prevail in this matter; therefore, we have not recorded any liability for this judgment nor are we recording any expense for the compulsory license.
Other. We are subject to other legal proceedings and claims that arise in the ordinary course of our business. The amount of ultimate liability with respect to such actions is not expected to materially affect our financial position, results of operations or liquidity.
The risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2005 have not materially changed.