Charter 2010 Annual Report Download - page 42

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 Legal Proceedings.
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Ronald A. Katz Technology Licensing, L.P. v. Charter
Communications, Inc. et. al. On September 5, 2006, Ronald A.
Katz Technology Licensing, L.P. served a lawsuit on Charter and a
group of other companies in the U. S. District Court for the District
of Delaware alleging that Charter and the other defendants have
infringed its interactive call processing patents. Charter denied the
allegations raised in the complaint. On March 20, 2007, the Judicial
Panel on Multi-District Litigation transferred this case, along with
24 others, to the U.S. District Court for the Central District of
California for coordinated and consolidated pretrial proceedings. On
May 5, 2010, the court denied Katz’s motion for summary judgment,
struck two affirmative defenses that Charter had raised, invalidated
one of the nine remaining claims Katz had asserted and entered
a ruling limiting Katz’s damages claims. Charter is vigorously
contesting this matter.
Rembrandt Patent Litigation. On June 6, 2006, Rembrandt
Technologies, LP sued Charter and several other cable companies
in the U.S. District Court for the Eastern District of Texas,
alleging that each defendant's high-speed data service infringes
three patents owned by Rembrandt and that Charter's receipt and
retransmission of Advanced Television Systems Committee digital
terrestrial broadcast signals infringes a fourth patent owned by
Rembrandt (Rembrandt I). On November 30, 2006, Rembrandt
Technologies, LP again filed suit against Charter and another cable
company in the U.S. District Court for the Eastern District of Texas,
alleging patent infringement of an additional five patents allegedly
related to high-speed Internet over cable (Rembrandt II). Charter
has denied all of Rembrandt’s allegations. On June 18, 2007, the
Rembrandt I and Rembrandt II cases were combined in a multi-
district litigation proceeding in the U.S. District Court for the
District of Delaware. On November 21, 2007, certain vendors of
the equipment that is the subject of Rembrandt I and Rembrandt II
cases filed an action against Rembrandt in U.S. District Court for
the District of Delaware seeking a declaration of non-infringement
and invalidity on all but one of the patents at issue in those cases.
On January 16, 2008 Rembrandt filed an answer in that case and
a third party counterclaim against Charter and the other MSOs
for infringement of all but one of the patents already at issue
in Rembrandt I and Rembrandt II cases. On February 7, 2008,
Charter filed an answer to Rembrandt’s counterclaims and added
a counter-counterclaim against Rembrandt for a declaration of
noninfringement on the remaining patent. On October 28, 2009,
Rembrandt filed a Supplemental Covenant Not to Sue promising not
to sue Charter and the other defendants on eight of the contested
patents. One patent remains in litigation, and Charter is vigorously
contesting Rembrandt's claims regarding it.
We are also defendants or co-defendants in several other unrelated
lawsuits claiming infringement of various patents relating to various
aspects of our businesses. Other industry participants are also
defendants in certain of these cases, and, in many cases including
those described above, we expect that any potential liability would be
the responsibility of our equipment vendors pursuant to applicable
contractual indemnification provisions.
In the event that a court ultimately determines that we infringe on
any intellectual property rights, we may be subject to substantial
damages and/or an injunction that could require us or our vendors
to modify certain products and services we offer to our subscribers,
as well as negotiate royalty or license agreements with respect to the
patents at issue. While we believe the lawsuits are without merit and
intend to defend the actions vigorously, no assurance can be given
that any adverse outcome would not be material to our consolidated
financial condition, results of operations, or liquidity.
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On March 27, 2009, Charter filed its chapter 11 petition in the
United States Bankruptcy Court for the Southern District of New
York. On the same day, JPMorgan Chase Bank, N.A., (“JPMorgan”),
for itself and as Administrative Agent under the Charter Operating
Credit Agreement, filed an adversary proceeding (the “JPMorgan
Adversary Proceeding”) in Bankruptcy Court against Charter
Operating and CCO Holdings seeking a declaration that there were
events of default under the Charter Operating Credit Agreement.
JPMorgan, as well as other parties, objected to the Plan. e
Bankruptcy Court jointly held 19 days of trial in the JPMorgan
Adversary Proceeding and on the objections to the Plan.
On November 17, 2009, the Bankruptcy Court issued its Order
and Opinion confirming the Plan over the objections of JPMorgan
and various other objectors. e Court also entered an order ruling
in favor of Charter in the JPMorgan Adversary Proceeding. Several
objectors attempted to stay the consummation of the Plan, but
those motions were denied by the Bankruptcy Court and the U.S.