Buoyed by Initial Court Victory, ViaSat Girds for Protracted Legal Battle with Loral

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PARIS — Satellite broadband hardware and service provider ViaSat Inc., having won an initial award of $283 million in a patent violation lawsuit against Loral Space and Communications, is preparing for a broader court case in which other Loral-built satellites may be targeted as part of an injunction, ViaSat Chief Executive Mark D. Dankberg said.

Dankberg said Carlsbad, California-based ViaSat’s most immediate concern, beyond a final court judgment confirming the initial damage award, is the Jupiter 2/EchoStar 19 satellite being built by Space Systems/Loral for ViaSat competitor EchoStar/Hughes Network Systems.

Also a possible issue is the two-satellite contract with NBN Co. of Australia for a national consumer-broadband system that, like the Jupiter 1/EchoStar 17 satellite already in orbit, bears a strong resemblance to the ViaSat-1 satellite in orbit.

Dankberg said any court injunction against ongoing patent infringement by Space Systems/Loral, if it is decided, will not take effect until a year or more from now.

“Loral’s behavior so far says they will fight this as long as they can,” Dankberg said. “We’re not saying we like it, we’re just saying we’re prepared for it.”

In an interview, Dankberg said the three-week trial in the U.S. District Court for the Southern District of California that ended with the April 24 award focused almost exclusively on Jupiter 1/EchoStar 17. ViaSat had said this satellite permitted Hughes to offer to satellite-television provider Dish Network the HughesNet broadband service that has become a principal source of customers for Hughes.

Dish and EchoStar/Hughes are both owned by Charlie Ergen, but ViaSat has a distribution agreement with Dish Network for its Exede service.

“The fact that Hughes had the same distribution capacity [as ViaSat] had a big impact on the distribution channels to market,” Dankberg said. “We’re seeing that now. Dish is much more effective.”

Without Jupiter 1/EchoStar 17’s use of ViaSat technology, “they couldn’t have made the same offer and they wouldn’t have had the [Dish] distribution channel, or they wouldn’t have had it to that extent,” Dankberg said.

ViaSat estimated that ViaSat’s Exede lost part of its time-to-market advantage over Hughes because of the ViaSat-patented technologies copied by satellite builder Space Systems/Loral — then owned by New York-based Loral Space and Communications.

A separate litigation against Space Systems/Loral — now owned by MDA Corp. of Canada — is not expected to move to trial until late 2015. Loral has announced it will appeal the jury verdict.

ViaSat has already spent more than $25 million on the first case and had asked for damages exceeding $600 million related to Jupiter 1/EchoStar 17.

“Are we disappointed we didn’t get the full amount? Yes. But we’re going to have more satellites, we’re working on ViaSat-2, which has new innovations, and we think the damage award is significant enough to cause people to pay attention to the issue of who owns which parts of a satellite design.”

Industry officials in general have expressed their unease with the ViaSat lawsuit, leveled against one of the world’s premier builders of commercial telecommunications satellites, saying it could cause relations between customers and satellite builders to stiffen in ways that will not serve the industry.

Dankberg said he was aware of these concerns, but that a close reading of the 100,000 pages of evidence introduced at the trial will conclude that ViaSat was not spoiling for a fight.

“One way to interpret this is that Loral was just going about its business and [was surprised by] ViaSat’s claims that it violated our intellectual property,” Dankberg said. “There’s another way to look at it, and this is why we encourage people to look at the trial records, is that this wasn’t an accident at all. Loral purposefully decided to make a copy of our satellite. It was not some accidental impingement on our rights. There are emails about our patents and their patents showing that Loral was completely aware of the situation.”

One of the likely issues to be raised in the new litigation and in determining whether an injunction is justifiable will be whether Palo Alto, California-based Space Systems/Loral has modified the design of Jupiter 2/EchoStar 19 and the two NBN satellites to avoid the ViaSat patents.

For Dankberg, Jupiter 2/EchoStar 19 “is the same thing” as Jupiter 1 as far as ViaSat’s patents are concerned. “It brings to market another satellite that uses our technology. So that’s an important element for us.”

One of the side effects of the ViaSat damages award is that it may have accelerated the sale of Loral Space and Communications, whose principal asset is satellite fleet operator Telesat of Canada.

Industry officials had said prospective buyers wanted to be able to assess the approximate liability to Loral of the ViaSat case before making firm offers and were given one with the $283 million award. Loral has said that, in the event it is sold, its liability would be a maximum of $200 million.

MDA Corp. and Loral disagree about whether the second ViaSat litigation should be viewed as an extension of the first — in which case Loral might have an ongoing responsibility for it — or as a separate legal matter, in which case Space Systems/Loral and MDA Corp. would be on their own and Loral would not be concerned.

Dankberg said the first case featured an “unusual situation” in which the company with an ongoing interest in Space Systems/Loral’s business — MDA Corp. — handed the reins of the trial to Loral Space and Communications, whose interest is purely financial and short-term.