HP 2013 Annual Report Download - page 156

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 17: Litigation and Contingencies (Continued)
Litigation, Proceedings and Investigations
Copyright Levies. As described below, proceedings are ongoing or have been concluded involving
HP in certain European Union (‘‘EU’’) member countries, including litigation in Germany, Belgium
and Austria, seeking to impose or modify levies upon equipment (such as multifunction devices
(‘‘MFDs’’), personal computers (‘‘PCs’’) and printers) and alleging that these devices enable producing
private copies of copyrighted materials. Descriptions of some of the ongoing proceedings are included
below. The levies are generally based upon the number of products sold and the per-product amounts
of the levies, which vary. Some EU member countries that do not yet have levies on digital devices are
expected to implement similar legislation to enable them to extend existing levy schemes, while some
other EU member countries have phased out levies or are expected to limit the scope of levy schemes
and applicability in the digital hardware environment, particularly with respect to sales to business
users. HP, other companies and various industry associations have opposed the extension of levies to
the digital environment and have advocated alternative models of compensation to rights holders.
VerwertungsGesellschaft Wort (‘‘VG Wort’’), a collection agency representing certain copyright
holders, instituted legal proceedings against HP in the Stuttgart Civil Court seeking to impose 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 Stuttgart Court of Appeals. On May 11, 2005, the Stuttgart Court
of Appeals 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 existing law. VG Wort appealed
the decision by filing a claim with the German Federal Constitutional Court challenging the ruling that
printers are not subject to levies. On September 21, 2010, the Constitutional Court published a decision
holding that the German Federal Supreme Court erred by not referring questions on interpretation of
German copyright law to the Court of Justice of the European Union (‘‘CJEU’’) and therefore revoked
the German Federal Supreme Court decision and remitted the matter to it. On July 21, 2011, the
German Federal Supreme Court stayed the proceedings and referred several questions to the CJEU
with regard to the interpretation of the European Copyright Directive. On June 27, 2013, the CJEU
issued its decision responding to those questions. The German Federal Supreme Court subsequently
scheduled a joint hearing on this matter with other cases relating to reprographic levies on printers and
PCs that was held on October 31, 2013, and is expected to be followed by a decision in January 2014.
In September 2003, VG Wort filed a lawsuit against Fujitsu Technology Solutions GmbH
(‘‘Fujitsu’’) in the Munich Civil Court in Munich, Germany seeking to impose 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 Fujitsu. On December 23, 2004, the Munich Civil
Court held that PCs are subject to a levy and that Fujitsu must pay A12 plus compound interest for
each PC sold in Germany since March 2001. Fujitsu appealed this decision in January 2005 to the
Munich Court of Appeals. On December 15, 2005, the Munich Court of Appeals affirmed the Munich
Civil Court decision. Fujitsu filed an appeal with the German Federal Supreme Court in February 2006.
On October 2, 2008, the German Federal Supreme Court issued a judgment that PCs were not
photocopiers within the meaning of the German copyright law that was in effect until December 31,
2007 and, therefore, were not subject to the levies on photocopiers established by that law. VG Wort
subsequently filed a claim with the German Federal Constitutional Court challenging that ruling. In
January 2011, the Constitutional Court published a decision holding that the German Federal Supreme
148