Lawsuit Makes Reluctant Adversaries of ViaSat and Loral

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PARIS — The two men at the center of what may be the space industry’s nastiest legal battle in years nonetheless went out of their way to shower each other with praise.

In separate interviews, ViaSat Chief Executive Mark D. Dankberg and Loral Space and Communications Chief Executive Michael B. Targoff said the depth of their admiration for each other makes the ViaSat lawsuit especially uncomfortable.

“The whole thing is horrible from the perspective that I have a lot of respect for Mickey — tons of respect for him,” Dankberg said in a Feb. 10 interview about ViaSat’s patent infringement and breach-of-contract lawsuit against Loral’s satellite manufacturing division, Space Systems/Loral (SS/L).

In a Feb. 7 interview, Targoff echoed those comments, saying: “I have a very high personal regard for Mark Dankberg.”

Targoff has been on Carlsbad, Calif.-based ViaSat’s six-member board of directors since 2003 and was awarded options for 6,600 shares of ViaSat stock just five days before ViaSat filed its lawsuit, on Feb. 1, in a California district court, according to a Jan. 31 filing with the U.S. Securities and Exchange Commission.

But Targoff also said he was surprised by ViaSat’s action, about which he said he had not been warned.

“I was very surprised by the out-of-the-blue nature of this,” Targoff said. “It would have been very easy for them to come to talk to us before filing a lawsuit, to agree to a standstill” in which both companies defer further action pending negotiations. “We could have signed that in 30 seconds.”

Dankberg disputed that.

“We feel like we’ve asked Loral to address this for years and they weren’t addressing it,” Dankberg said. “It wasn’t that they didn’t understand it. They didn’t address it. We knew that after our patents were issued, that this would change the landscape.”

ViaSat has received three patents related to high-throughput broadband satellites and their ground networks — the technologies the company says are embedded in its ViaSat-1 consumer broadband satellite, which entered service in January. The third of these patents was awarded Jan. 31. The next morning, ViaSat’s legal team at the San Francisco law firm of Quinn, Emanuel, Urquhart & Sullivan filed the lawsuit.

The core of the lawsuit refers to “SS/L’s pattern of using the proprietary information of other companies for its own benefit.”

Targoff, in the interview, defended his company’s integrity and said one side effect of the lawsuit may be to permit SS/L to show a paper trail proving that the technologies SS/L used on ViaSat competitor Hughes’ Jupiter satellite, set for launch later this year, did not come from ViaSat.

“We may be able to share things with [ViaSat] now that we could not share before, if the lawsuit provides the occasion,” Targoff said. “I hope that it will. They appear to believe they have invented the wheel with respect to high-throughput broadband satellites. We think the wheel has been around for some time.

“They have a bunch of patents, and we’ve known about this for some time. We have patents as well. The question is the significance of the patents. These are questions that come up in technology disputes.”

Dankberg agreed but said ViaSat, despite repeated attempts, was unable to get SS/L to address the problem issues.

“We understand our position, of course. We really don’t understand Loral’s,” he said. “There are inventions out there. You invented it first, or we invented it first. We’re trying to get an independent judgment of that. We were really thoughtful about our complaint. We researched it and we think it’s an accurate representation of what happened.”

The immediate effects of the lawsuit are unclear. Dankberg said that ViaSat believes its technology has been improperly included in most, if not all, SS/L-built satellites delivered since 2008.

Loral on Feb. 8 was awarded a two-satellite, $668 million contract from Australia’s NBN Co. for Ka-band broadband satellites that bear at least some similarities to ViaSat-1.

Targoff said Loral had been concerned that the Feb. 1 lawsuit might scare off NBN on the eve of the contract signing. In the end, he said, SS/L was able to reassure NBN officials that the ViaSat development would not undermine Loral’s ability to perform under the contract.

Dankberg said the legal action makes it less likely that SS/L will be selected as prime contractor for ViaSat-2, an even higher-throughput Ka-band satellite that ViaSat expects to order before July.

SS/L might have been considered the favorite for that contract given its work on ViaSat-1, but Dankberg said working with SS/L before the dispute is settled is unlikely despite the fact that “Loral is actually a very capable manufacturer.”

“We’d be much better off having someone less qualified build [ViaSat-2] and not having our technology used against us,” Dankberg said.

Targoff said he would have preferred that the two companies resolve their differences before a lawsuit was filed, not after, but that such talks will now begin notwithstanding the soured relations.

Dankberg agreed. “We filed the complaint but we didn’t serve it, in case Loral said it wanted to talk,” he said. “They want to talk, and now what we’re waiting for is to have some substantial talks. If Loral would like to settle, that’s OK with us. But we did not file the lawsuit assuming they would settle.

“Our damages are pretty substantial.”