HP 2006 Annual Report Download - page 132

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Consolidated Statements of Earnings (Continued)
Note 17: Litigation and Contingencies (Continued)
In July 2004, VG Wort filed a separate lawsuit against HP in the Stuttgart Civil Court seeking
levies on printers. On December 22, 2004, the court held that HP is liable for payments regarding all
printers using ASCII code sold in Germany but did not determine the amount payable per unit. HP
appealed this decision in January 2005 to the Higher Regional Court of Baden Wuerttemberg. On
May 11, 2005, the Higher Regional Court issued a decision confirming that levies are due. On June 6,
2005, HP filed an appeal to the German Supreme Court in Karlsruhe.
In September 2003, VG Wort filed a lawsuit against Fujitsu Siemens Computer GmbH (‘‘FSC’’) in
Munich State Court seeking levies on PCs. This is an industry test case in Germany, and HP has
undertaken to be bound by a final decision. On December 23, 2004, the Munich State Court held that
PCs are subject to a levy and that FSC must pay 12 euros plus compound interest for each PC sold in
Germany since March 2001. FSC appealed this decision in January 2005 to the Higher Regional Court
of Bavaria. On December 15, 2005, the Higher Regional Court affirmed the Munich State Court
decision. FSC filed a notice of appeal with the German Supreme Court in February 2006.
On December 29, 2005, ZPU, a joint association of various German collection societies, instituted
non-binding arbitration proceedings against HP before the arbitration board of the Patent and
Trademark Office demanding reporting of every PC sold by HP in Germany from January 2002 through
December 2005 and seeking a levy of 18.42 euros plus tax for each PC sold during that period. HP
filed a notice of defense in connection with these proceedings in February 2006 and the grounds for its
defense in May 2006.
Based on industry opposition to the extension of levies to digital products, HP’s assessments of the
merits of various proceedings and HP’s estimates of the units impacted and levies, HP has accrued
amounts that it believes are adequate to address the matters described above. However, the ultimate
resolution of these matters, including the number of units impacted, the amount of levies imposed and
the ability of HP to recover such amounts through increased prices, remains uncertain.
Alvis v. HP is a defective product consumer class action filed in the District Court of Jefferson
County, Texas in April 2001. In February 2000, a similar suit captioned LaPray v. Compaq was filed in
the District Court of Jefferson County, Texas. The basic allegation is that HP and Compaq sold
computers containing floppy disk controllers that fail to alert the user to certain floppy disk controller
errors. That failure is alleged to result in data loss or data corruption. The complaints in Alvis and
LaPray seek injunctive relief, declaratory relief, unspecified damages and attorneys’ fees. In July 2001, a
nationwide class was certified in the LaPray case, which the Beaumont Court of Appeals affirmed in
June 2002. The Texas Supreme Court reversed the certification and remanded to the trial court in
May 2004. On March 29, 2005, the Alvis trial court certified a Texas-wide class action for injunctive
relief only, which HP appealed on April 15, 2005. HP’s appeal in the Alvis case is still pending. On
June 4, 2003, each of Barrett v. HP and Grider v. Compaq was filed in the District Court of Cleveland
County, Oklahoma, with factual allegations similar to those in Alvis and LaPray. The complaints in
Barrett and Grider seek, among other things, specific performance, declaratory relief, unspecified
damages and attorneys’ fees. On December 22, 2003, the District Court entered an order staying the
Barrett case until the conclusion of Alvis. On September 23, 2005, the District Court granted the Grider
plaintiffs’ motion to certify a nationwide class action which the Oklahoma Court of Civil Appeals
affirmed on October 13, 2006. On November 5, 2006, HP filed a Petition for Writ of Certiorari with the
Oklahoma Supreme Court seeking reversal of the lower courts’ decisions. On November 5, 2004,
Batiste v. HP (formerly Scott v. HP), and on January 27, 2005, Schultz v. HP (formerly Jurado v. HP),
128