More on EchoStar’s questionable litigation tactics

Geoffrey Manne —  24 November 2010

The day before yesterday I posted on the fascinating and important TiVo v. EchoStar case.  Today I wanted to follow up with some, let’s say, color commentary on EchoStar’s litigation tactics.  This isn’t dispositive, of course, but it does seem to add some insight into the notion that EchoStar is taking advantage of questionable litigation tactics rather than respecting property rights in its dealings with TiVo.

You’ll recall that, in the case, EchoStar lost at trial, ignored the judge’s order to stop infringing, was held in contempt, and continues infringing today.  This has resulted in numerous legal proceedings, all managing to keep TiVo bogged down in litigation as EchoStar continues to misappropriate TiVo’s intellectual property.  Although EchoStar has accrued substantial legal expenses—and damage awards from both a jury and the judge—they are dwarfed by its DVR revenues.

It turns out that courtroom shenanigans are no stranger to EchoStar.

Just last week, a state trial judge in Manhattan found that EchoStar exhibited grossly negligent behavior in a case involving Cablevision’s VOOM subsidiary.  The language in VOOM v. EchoStar characterized EchoStar’s misconduct  (allowing critical e-mail evidence to be destroyed) in an exceedingly harsh manner, holding that EchoStar “systematically destroyed evidence in direct violation of the law and in the face of a ruling by a federal court that criticized EchoStar for the same bad-faith conduct . . . .” The judge went on to characterize EchoStar as engaging in “procedural gamesmanship” and noted “EchoStar’s pattern of questionable — and, at times, blatantly improper — litigation tactics.”

The court further described EchoStar’s conduct as “precisely the type of offensive conduct that cannot be tolerated by the courts.” It rebuked “EchoStar’s last-minute finagling with expert reports, believing that it can play fast and loose with the rules of procedure in order to enhance its litigation posture . . . throughout this litigation, EchoStar has been hoist by its own petard.”

Arguably EchoStar has made this type of legal strategy part of its business model.

In the TiVo case, like many others, EchoStar’s gamesmanship and its propensity to abuse the law has become a central issue. In an amicus brief submitted by agricultural organizations in the TiVo case, the groups argue: “EchoStar’s conduct in this case . . . and in other cases, displays a propensity to flout court orders,” and goes on to cite several examples of this behavior, including:

  • breaking promises to the court (CBS Broad. Inc. v. EchoStarCommc’ns Corp., 276 F. Supp. 2d 1237, 1246 (S.D. Fl. 2003));
  • patently unmeritorious claims of error (CBS Broadcasting Inc. v. EchoStar Commc’ns Corp., 450 F.3d 505, 523, 526 (11th Cir. 2006));
  • misleading and coercive communication (Air Commun. & Satellite Inc. v. Echostar Satellite Corp., 38 P.3d 1246, 1254 (Colo. 2002));
  • and even frivolous actions (Dominion Video Satellite, Inc. v. EchoStar Satellite L.L.C., 430 F.3d 1269, 1278 (10th Cir. 2005)).
  • Further, in a 2004 case, one federal judge claimed that “EchoStar’s action rises to the level of conscious wrongdoing” (EchoStar Satellite Corp. v. Brockbank Ins. Servs., No. 00-MK-1513, 2004 U.S. Dist. LEXIS 31130 (D. Colo. Feb. 4, 2004)),
  • another chided EchoStar for failing “in its duty of candor . . . .We admonish EchoStar for this abuse of process” (EchoStar Satellite Corp. v. Young Broad. Inc., 16 F.C.C.R. 15070, 15076 (Aug. 2, 2001)).

Of course any good lawyer advocating for his client may push the envelope, and some of these procedural matters are governed by standards that are less than clear.  But this is a worrisome list of excesses, and should certainly raise eyebrows in the TiVo case.

Of a piece with this, in addition to the problem of EchoStar’s overall strategy of delay, avoidance and misappropriation in the TiVo case, is also EchoStar’s fantastic claim that upholding the lower court’s contempt proceeding would inflict serious hardship on the firm, causing it to lose a substantial fraction of its present and future customer base (to the tune of $90 million per month).  Unfortunately, this customer base was built, indisputably (that is, undisputed even by EchoStar which does not challenge the underlying infringement finding), on the back of TiVo’s misappropriated technology.  It is like the child who murders her parents and then throws herself on the mercy of the court as an orphan. It seems absurd to listen to EchoStar claim hardship from the prospect of losing business it never earned in the first place.

As Richard Epstein noted in his amicus brief in the case:

In effect EchoStar’s argument is that once it has built up a large business on the back of someone else’s patents, it should be allowed to reap those profits for the indefinite future.  The size of its own illicit gains becomes the tool it deftly uses to extend its illicit activity indefinitely.  This approach creates the perverse outcome that the longer the defendant is able to wiggle away from legal sanctions, the stronger is its case to continue on its unlawful path.  EchoStar’s claims of large future losses prove only one thing: that its large monthly losses make the damages awarded for TiVo in 2006 look puny relative to the continuing harm from EchoStar’s misbehavior.

The VOOM holding is just the latest in a serial pattern of courtroom distractions and legal delays. It seems EchoStar has made a practice out of disobeying court orders and pushing the legal system to the limits. Like the TiVo case, VOOM and others demonstrate that a determined party can drag out the legal process and prevent the other side from obtaining a remedy for harm it has suffered. As I noted the other day, this is particularly true for software devices and other complex products, where trivial changes can be exaggerated in an effort to run out the clock on a patent.

In the TiVo case the stakes are enormous. EchoStar is working to undermine the role of the courts in enforcing the intellectual property rights that facilitate innovation.  And more, a victory for EchoStar would send a message to large and small companies, innovators and capitalists that abusing the court’s rules of procedure is not only fair game, but also a legitimate business tactic.

Geoffrey Manne

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3 responses to More on EchoStar’s questionable litigation tactics

  1. 
    Former Acquaintance 2 December 2010 at 4:08 pm

    Just ask for the electronic evidence. They delete all evidence (email). They had an email discovery system and senior management obviously didn’t like its intrusion so it was ripped out. FRCP does not exist for them. If they can’t produce or did not preserve ( same as VOOM) then they are hiding something. Public company that thinks its still private.

  2. 
    Former Employee 28 November 2010 at 9:34 am

    As a former employee of Echostar that has an open discrimination, harassment, whistleblower and retaliation case open with the state and federal government against Echostar and my former boss, director and HR, I can say without a doubt this happens. I was member of the “higher ups” that was retaliated against for excercising my FLSA right per their policy and the Civil Rights Act of 1965. Echostar has lied, cheated and continued to provide falsified evidence inmy my case, just like they have done many times before. The very same legal team above that committed numerous infractions and has received numerous legal sanctions attempts to besmirch my good name and black ball me from my employment industry. I am speaking out and fighting back hard though and am happy to take interviews and make comments. Echostar needs to know that they cannot treat businesses and people this way. They actually have told me that “we are a big company with a lot of lawyers and will beat you” when they approached me about filing a labor claim. I worked for Echostar over 7 years and obtained numerous promotions and more, just to be thrown out the back door and stepped on conatntly. Customers, clients and others are treated badly including main uplink employees by some of these management and legal professionals(?). This story rings all too true. Happy to comment more….

  3. 

    I can only talk from my own experience. Dish Network cheated me out of promised (in their advertising and on the internet – I still have copies of what they promised and what I did to meet their requirements) credits for subscribing to their service. I did what they required and overdid it for that matter. Never got the credits even after prolonged correspondence with them and sending them the copies proving their offers and my compliance.

    And later, when I ended my subcription, I KNEW that they would continue to cheat me. I made a copy of my telephoned termination, followed it up with an emailed confirmation, and because I KNEW that I would need this in the future, that day that I terminated the service, I send an email to my credit card company to tell them to expect “continued billing” beyond the termination date. Dish did not disappoint me. They continued bill for long after termination. The credit card company refused payment. Then DISH outdid themselves and for about two years now continue to get varying collection agencies to waste their time attempting to collect overbillings that I have proof that I did not need to pay nor would ever pay.

    Dish knows no boundaries, at least in my experience. The article in question is just one more indication of the reckless and irresponsible behavior of a BAD organization.