Dell 2007 Annual Report Download - page 90

Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On December 29, 2005, Zentralstelle Für private Überspielungrechte ("ZPÜ"), a joint association of various German collection
societies, instituted arbitration proceedings against Dell's German subsidiary before the Arbitration Body in Munich. ZPÜ
claims a levy of €18.4 per PC that Dell sold in Germany from January 1, 2002 through December 31, 2005. On July 31, 2007,
the Arbitration Body recommended a levy of €15 on each PC sold during that period, for audio and visual copying capabilities.
Dell and ZPÜ rejected the recommendation and on February 21, 2008, ZPÜ filed a lawsuit in the German Regional Court in
Munich. Dell plans to continue to defend this claim vigorously. In the fourth quarter of Fiscal 2008, the German Federal
Supreme Court decided that printers are not leviable. Dell is currently not aware of any other pending levy cases before the
German Federal Supreme Court that could reasonably be expected to have a material adverse impact on Dell.
• Lucent v. Dell — In February 2003, Lucent Technologies, Inc. filed a lawsuit against Dell in the United States District Court for
Delaware, and the lawsuit was subsequently transferred to the United States District Court for the Southern District of
California. The lawsuit alleges that Dell infringed 12 patents owned by Lucent and seeks monetary damages and injunctive
relief. In April 2003, Microsoft Corporation filed a declaratory judgment action against Lucent in the United States District
Court for the Southern District of California, asserting that Microsoft products do not infringe patents held by Lucent, including
10 of the 12 patents at issue in the lawsuit involving Dell and Microsoft. These actions were consolidated for discovery
purposes with a previous suit that Lucent filed against Gateway, Inc. In September 2005, the court granted a summary judgment
of invalidity with respect to one of the Lucent patents asserted against Dell. In subsequent decisions, the court granted summary
judgment of non-infringement with respect to five more of the Lucent patents asserted against Dell. Fact and expert discovery
has closed, and the three actions have been consolidated. The asserted patents are owned by two parties: Alcatel-Lucent and
Multimedia Patent Trust (MPT). Prior to trial, Gateway settled with both Alcatel-Lucent and MPT. Dell settled with MPT,
licensing the patents asserted by MPT in the lawsuit, but not with Alcatel-Lucent. Dell has satisfactorily resolved its indemnity
coverage related to Microsoft products it uses or distributes and has determined that, in conjunction with the MPT license, such
indemnity substantially reduces Dell's exposure to the Alcatel-Lucent lawsuit. Trial as to those Alcatel-Lucent owned patents
began February 20, 2008, in San Diego federal court. Microsoft and Dell are defending these claims at trial, which is scheduled
to end no later the April 4, 2008. Separately, Dell filed a lawsuit against Lucent in the United States District Court for the
Eastern District of Texas, alleging that Lucent infringes two patents owned by Dell and seeking monetary damages and
injunctive relief. That case went to trial ending in a jury verdict on February 1, 2008, that the patents were valid but not
infringed. Dell is considering its options for challenging the verdict and appeal.
Dell is involved in various other claims, suits, investigations, and legal proceedings that arise from time to time in the ordinary course of
its business. Although Dell does not expect that the outcome in any of these other legal proceedings, individually or collectively, will
have a material adverse effect on its financial condition or results of operations, litigation is inherently unpredictable. Therefore, Dell
could incur judgments or enter into settlements of claims that could adversely affect its operating results or cash flows in a particular
period.
Certain Concentrations — All of Dell's foreign currency exchange and interest rate derivative instruments involve elements of market
and credit risk in excess of the amounts recognized in the consolidated financial statements. The counterparties to the financial
instruments consist of a number of major financial institutions. In addition to limiting the amount of agreements and contracts it enters
into with any one party, Dell monitors its positions with, and the credit quality of the counterparties to, these financial instruments. Dell
does not anticipate nonperformance by any of the counterparties.
Dell's investments in debt securities are in high quality financial institutions and companies. As part of its cash and risk management
processes, Dell performs periodic evaluations of the credit standing of the institutions in
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