ViaSat Accuses Loral of Orchestrating Patent Infringement

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PARIS — Satellite broadband hardware and services provider ViaSat Inc. is renewing its attempt to draw Loral Space and Communications into ViaSat’s lawsuit against satellite builder Space Systems/Loral (SS/L), saying the New York-based parent company is the brain that guides SS/L’s every move.

Carlsbad, Calif.-based ViaSat says that if Loral is allowed to remove itself from the lawsuit for patent infringement and breach of contract, it will continue to infringe on ViaSat’s intellectual property by closing satellite deals on SS/L’s behalf.

In a document filed with the U.S. District Court for the Southern District of California, ViaSat says Loral was instrumental in SS/L’s win of the contract to build ViaSat’s ViaSat-1 Ka-band consumer broadband satellite. This satellite, which entered operations in January, is at the center of the lawsuit filed Feb. 1.

ViaSat says SS/L, guided by Loral, used ViaSat-owned intellectual property to win other satellite contracts, in particular a contract with ViaSat’s direct competitor, Hughes Network Systems. Hughes’ ViaSat-1 lookalike, formerly named Jupiter and now named EchoStar 17, is scheduled for launch this summer.

“ViaSat now stands to lose market advantage, including hundreds of thousands of customers that otherwise would have been customers of ViaSat-1 or subsequent ViaSat satellites,” ViaSat says in its May 25 filing with the court.

The court on May 7 had dismissed ViaSat’s attempt to have Loral included in the lawsuit, saying California law requires that a “unity of interest” between a company and its 100 percent-owned subsidiary before the two are lumped together in a legal action.

The court also rejected SS/L’s attempt to have the case thrown out entirely. Palo Alto, Calf.-based SS/L has countersued ViaSat in the same court, saying ViaSat had used multiple SS/L-patented techniques without authorization.

The heart of the May 25 document is ViaSat’s attempts to prove to the court that “piercing the corporate veil” between SS/L and Loral is justified.

In one of the more surprising allegations in the document, ViaSat says SS/L never would have used ViaSat’s patents were it not urged to do so by its parent company.

ViaSat says Loral “induced SS/L to seek out and enter” satellite manufacturing contracts with ViaSat intellectual property, ViaSat says. “Without Loral’s inducement and support, SS/L could not have offered or obtained the manufacturing contracts.”

ViaSat mentions no specific contract wins by SS/L other than Jupiter/EchoStar 17 and a contract with NBN Co. of Australia to build two Ka-band broadband satellites.

For the ViaSat-1 contract, ViaSat says it had selected another manufacturer for the job in 2007 but that Loral Chief Executive Michael B. Targoff salvaged the work for SS/L by directly negotiating the contract.

It was Targoff, ViaSat says, who returned to ViaSat with a lower-cost bid that included a Loral agreement to purchase the equivalent of 15 percent of ViaSat-1’s capacity and to assume a corresponding share of the satellite’s construction and launch costs.

Loral subsequently sold its ViaSat-1 capacity rights to satellite fleet operator Telesat of Canada, in which Loral has a majority economic interest.

The revised SS/L bid “was eventually described and embodied in a term sheet hand-written by Mr. Targoff himself,” ViaSat says. “Without Loral’s direct participation in SS/L’s offer for sale, ViaSat would have contracted with a different satellite manufacturer.”

ViaSat says it signed a separate series of confidentiality agreements with both Loral and SS/L.

For NBN Co., ViaSat says it understands that Loral and Targoff were similarly involved. ViaSat says Loral’s filing to the U.S. Securities and Exchange Commission (SEC) covering the first three months of 2012 references a $60 million performance guarantee that Loral made for an unnamed customer that ViaSat says is almost certainly NBN Co.

“There would be an injustice if Loral were not included in the lawsuit because Loral, despite not being signatory to the contracts, has received from SS/L information that was disclosed to SS/L under the ViaSat NDA [nondisclosure agreement],” ViaSat says. “Loral has subsequently put this proprietary information to its own use” in other satellite contracts.

Loral on June 1 said it would decline to comment on the ViaSat court filing.

In its own SEC filing, dated May 25, ViaSat says it spent about $1.1 million on the SS/L and Loral lawsuit in the three months ending March 31. The company also says it owes SS/L up to $39 million, including 7 percent annual interest, in ViaSat-1 performance incentive payments over 15 years.