HP 2007 Annual Report Download - page 148

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 17: Litigation and Contingencies (Continued)
as for products sold from 2002 onwards. On July 26, 2007, the court issued a decision following the ruling of the Stuttgart
Court of Appeals with respect to the initial VG Wort lawsuit as described above. HP has appealed the decision. The Appeal
Court has stayed the proceedings pending the German Federal Supreme Court judgment in the initial VG Wort lawsuit
seeking levies on MFDs described above.
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 Federal Supreme Court in Karlsruhe. On December 6, 2007 the German
Federal Supreme Court issued a judgment that printers are not subject to levies under the existing law. The court has not yet
issued a written decision, and VG Wort has indicated that it is considering a claim to the German Federal Constitutional
Court.
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 agreed not to object to the delay if VG Wort sues
HP for such levies on PCs following a final decision against FSC. 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 an appeal with the German Federal 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 an
arbitration hearing was held in December 2006. On August 3, 2007, the arbitration board issued a ruling proposing a levy of
15 euros plus tax for each PC sold during that period. HP has rejected the ruling of the arbitration board, and the arbitration
proceedings have concluded. ZPU has indicated it will pursue the claim through the regular courts.
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 and the associated financial impact on
HP, 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
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