Clause & Effect

Satellite Television/Programming-Exclusivity Agreements. The U.S. District Court for the District of Colorado decided that a satellite channel breached its agreement to exclusively provide its programming to the DISH Network satellite broadcast service. EchoStar Satellite LLC v. Persian Broadcasting Co. Inc. (PBC), 05-cv-00466-PSF-MEH. EchoStar and PBC had executed an affiliation agreement under which PBC agreed to provide its Farsi-language programming to DISH Network in the United States. An exclusivity provision in the affiliation agreement stated: 'Notwithstanding the foregoing grant of exclusive rights, [PBC] shall not be in breach of the exclusivity provision contained in this Agreement, if [PBC] distributes the Tapesh 1 channel to subscribers to its current service offered on the Telstar 5 satellite ('Current Service') (provided that such subscribers shall be limited to those subscribers that are in existence as of the Effective Date) ' until [Sept. 30, 2004] and during such time, [PBC] shall use its best efforts to migrate the [PBC] Customers to the DISH Network distribution platform ' For clarity, the parties agree and acknowledge that notwithstanding anything to the contrary contained in this Agreement, in no event will [PBC] broadcast the Tapesh 1 channel on the Current Service after [Sept. 30, 2004].'

EchoStar filed suit alleging that PBC had materially breached the affiliation agreement in part by continuing to distribute its programming on GlobeCast North America's Telstar 5 satellite after the exclusivity-provision deadline had passed. PBC argued that the exclusivity provision was 'ambiguous, at best, as to whether the broadcasting prohibition extends only to distribution to 'subscribers' or to all distribution on GlobeCast beyond the Sept. 30, 2004 deadline.' Because GlobeCast had no 'subscribers' who paid monthly fees for service, PBC claimed that its agreement with EchoStar allowed PBC to continue to have its programming distributed on Telstar 5.

But the district court noted: 'It is true that the provision allowed PBC to continue broadcasting to GlobeCast's then-current 'subscribers' until the agreed-upon deadline, and EchoStar does not contest that GlobeCast does not have paying subscribers. However, the provision also states unequivocally: 'For clarity, the parties agree and acknowledge that notwithstanding anything to the contrary contained in this Agreement, in no event will [PBC] broadcast the Tapesh 1 channel on the Current Service [GlobeCast] after [the deadline].' This language requires PBC to cease broadcasting its Tapesh 1 channel on GlobeCast after the stated deadline, regardless of the extent of its authority to broadcast prior to that date.'

The court also noted that PBC's interpretation of the exclusivity provision 'defeats its purpose ' to grant EchoStar an exclusive right to broadcast PBC's Farsi programming. If PBC were free under the Agreement to continue broadcasting on the GlobeCast satellite because GlobeCast has no paying subscribers, EchoStar by definition could not 'exclusively' broadcast or distribute PBC's Programming. Thus, PBC has not shown that there is more than one reasonable interpretation of the provision.' Finding PBC breached as a matter of law, the court added: 'Moreover, even if the provision were ambiguous, the extrinsic evidence demonstrates as a matter of law that PBC's interpretation is at odds with the parties' intent.'

EchoStar also alleged that PBC breached its affiliation-agreement warranty that 'it presently has and will continue to have at all times during the Term all rights necessary to grant EchoStar the rights contracted for by EchoStar under this Agree-ment, including without limitation the exclusive right to distribute and broadcast in the [United States] all programming content included within the Programming Service.'

The district court, however, found no breach of the warranty. 'PBC simply leases transponder capacity and downlink and uplink services from GlobeCast, and makes a monthly lease payment to GlobeCast that appears unrelated to whether PBC actually broadcasts over the leased channels,' the court explained. 'There is no provision that obligates PBC to actually broadcast the Programming on GlobeCast, which has no apparent interest in whether that occurs as long as PBC complies with its monthly payment obligations.”

Satellite Television/Programming-Exclusivity Agreements. The U.S. District Court for the District of Colorado decided that a satellite channel breached its agreement to exclusively provide its programming to the DISH Network satellite broadcast service. EchoStar Satellite LLC v. Persian Broadcasting Co. Inc. (PBC), 05-cv-00466-PSF-MEH. EchoStar and PBC had executed an affiliation agreement under which PBC agreed to provide its Farsi-language programming to DISH Network in the United States. An exclusivity provision in the affiliation agreement stated: 'Notwithstanding the foregoing grant of exclusive rights, [PBC] shall not be in breach of the exclusivity provision contained in this Agreement, if [PBC] distributes the Tapesh 1 channel to subscribers to its current service offered on the Telstar 5 satellite ('Current Service') (provided that such subscribers shall be limited to those subscribers that are in existence as of the Effective Date) ' until [Sept. 30, 2004] and during such time, [PBC] shall use its best efforts to migrate the [PBC] Customers to the DISH Network distribution platform ' For clarity, the parties agree and acknowledge that notwithstanding anything to the contrary contained in this Agreement, in no event will [PBC] broadcast the Tapesh 1 channel on the Current Service after [Sept. 30, 2004].'

EchoStar filed suit alleging that PBC had materially breached the affiliation agreement in part by continuing to distribute its programming on GlobeCast North America's Telstar 5 satellite after the exclusivity-provision deadline had passed. PBC argued that the exclusivity provision was 'ambiguous, at best, as to whether the broadcasting prohibition extends only to distribution to 'subscribers' or to all distribution on GlobeCast beyond the Sept. 30, 2004 deadline.' Because GlobeCast had no 'subscribers' who paid monthly fees for service, PBC claimed that its agreement with EchoStar allowed PBC to continue to have its programming distributed on Telstar 5.

But the district court noted: 'It is true that the provision allowed PBC to continue broadcasting to GlobeCast's then-current 'subscribers' until the agreed-upon deadline, and EchoStar does not contest that GlobeCast does not have paying subscribers. However, the provision also states unequivocally: 'For clarity, the parties agree and acknowledge that notwithstanding anything to the contrary contained in this Agreement, in no event will [PBC] broadcast the Tapesh 1 channel on the Current Service [GlobeCast] after [the deadline].' This language requires PBC to cease broadcasting its Tapesh 1 channel on GlobeCast after the stated deadline, regardless of the extent of its authority to broadcast prior to that date.'

The court also noted that PBC's interpretation of the exclusivity provision 'defeats its purpose ' to grant EchoStar an exclusive right to broadcast PBC's Farsi programming. If PBC were free under the Agreement to continue broadcasting on the GlobeCast satellite because GlobeCast has no paying subscribers, EchoStar by definition could not 'exclusively' broadcast or distribute PBC's Programming. Thus, PBC has not shown that there is more than one reasonable interpretation of the provision.' Finding PBC breached as a matter of law, the court added: 'Moreover, even if the provision were ambiguous, the extrinsic evidence demonstrates as a matter of law that PBC's interpretation is at odds with the parties' intent.'

EchoStar also alleged that PBC breached its affiliation-agreement warranty that 'it presently has and will continue to have at all times during the Term all rights necessary to grant EchoStar the rights contracted for by EchoStar under this Agree-ment, including without limitation the exclusive right to distribute and broadcast in the [United States] all programming content included within the Programming Service.'

The district court, however, found no breach of the warranty. 'PBC simply leases transponder capacity and downlink and uplink services from GlobeCast, and makes a monthly lease payment to GlobeCast that appears unrelated to whether PBC actually broadcasts over the leased channels,' the court explained. 'There is no provision that obligates PBC to actually broadcast the Programming on GlobeCast, which has no apparent interest in whether that occurs as long as PBC complies with its monthly payment obligations.”