Dell 2010 Annual Report Download - page 97

Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2002, through December 31, 2005. On July 31, 2007, the Arbitration Body recommended a levy of €15 on each PC sold by Dell
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 with respect to levies to be paid through the end of calendar year
2007. On December 23, 2009, ZPÜ and the German industry association, BCH, reached a settlement regarding audio-video
copyright levy litigation. The settlement provided for payment of levies in the amount of €3.15 for calendar years 2002 and 2003,
€6.30 for calendar years 2004 through 2007, and €12.15 (for units excluding a burner) and €13.65 (for units including a burner) for
calendar years 2008 through 2010. Dell joined this settlement on February 23, 2010 and has paid the amounts due thereunder.
Because the settlement agreement expired on December 31, 2010, the amount of levies payable after calendar year 2010, as well as
Dell's ability to recover such amounts through increased prices, remains uncertain.
Additionally, there are proceedings in Spain to which Dell is not a party, but that could impact Dell's obligation to collect and remit
levies across the EU. In March 2006, Sociedad General de Autores y Editores de Espana ("SGAE"), a Spanish collecting society,
sued Padawan SL, a company unaffiliated with Dell, in the Commercial Court number four of Barcelona in Spain claiming that
Padawan owed levies on the CD-Rs, CD-RWs, DVD-Rs, and MP3 players sold by Padawan. In June 2007, the trial court upheld
SGAE's claim and ordered Padawan to pay specified levies. Padawan appealed the decision to the Audiencia Provincial de
Barcelona, which stayed the proceedings in order to refer the case to the ECJ. The ECJ considered the interpretation of the term
"fair compensation" under the European Copyright Directive ("Directive"). On October 21, 2010, the ECJ issued its decision and
outlined how fair compensation should be considered under the Directive by the EU member states. The ECJ stated that fair
compensation must be calculated based on the harm caused to the authors of protected works by private copying. The ECJ also
stated that the indiscriminate application of the private copying levy to devices not made available to private users and clearly
reserved for uses other than private copying is incompatible with the Directive. The matter has been referred back to the Spanish
court to determine whether the Spanish copyright levy scheme is compatible with the Directive based on the guidance provided by
the ECJ. It is unclear at this time what the effect of this decision will be on copyright levies in Spain and the other EU member
states. Dell continues to collect and remit levies in Spain and other EU countries where it has determined that based on local law it
is probable that Dell has an obligation.
The ultimate resolution of these matters and the associated financial impact to Dell, if any, including the number of units potentially
affected, the amount of levies imposed, and the ability of Dell to recover such amounts remains uncertain at this time. Should the
courts determine there is liability for previous units shipped beyond what Dell has collected or accrued, Dell would be liable for
such incremental amounts. Recovery would only be possible on future collections related to future shipments.
Sharp Corporation v Dell Inc. — Sharp Corporation ("Sharp") filed a suit against Dell in October 2008 for trademark infringement,
unfair competition and dilution in the U.S. District Court in the State of New Jersey. Sharp alleges that it is the owner of the
"SHARP" mark and that this mark and related marks are used in connection with Sharp's sale of a wide variety of electrical and
consumer electronic products. Sharp alleges that Dell has infringed the "SHARP" mark by using the "UltraSharp" and "Dell
UltraSharp" marks to promote, advertise and sell computer monitors and notebook computers, from 2002 to the present. Sharp
alleges that Dell's use of "UltraSharp" has and will continue to cause actual consumer confusion regarding the source of
"UltraSharp". In addition, Sharp has asserted a claim for dilution of its SHARP marks on the alleged ground that Dell's use of DELL
UltraSharp and UltraSharp has weakened the distinctive value of its marks. Sharp seeks damages measured by Dell's profits made
from the sale of DELL UltraSharp products, treble damages, punitive damages, costs and attorneys' fees. Sharp also seeks a
permanent injunction precluding the use of Dell's allegedly infringing "UltraSharp" mark. Dell disputes the claims and is vigorously
defending the case. Trial in this matter is currently scheduled for June 2011. The ultimate resolution of this matter and the
associated financial impact to Dell, if any, remains uncertain at this time.
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