Lexmark 2014 Annual Report Download - page 122

the outcome of local legislative processes, the Company’s and other industry participants’ outcome in contesting the fees and the
Company’s ability to mitigate that impact by increasing prices, which ability will depend upon competitive market conditions, remains
uncertain. As of December 31, 2014, the Company has accrued approximately $56.3 million for pending copyright fee charges,
including litigation proceedings, local legislative initiatives and/or negotiations with the parties involved. Although it is reasonably
possible that amounts may exceed the amount accrued by the Company, such amount, or range of possible loss, given the complexities
of the legal issues in these matters, cannot be reasonably estimated by the Company at this time.
As of December 31, 2014, approximately $51.1 million of the $56.3 million accrued for the pending copyright fee issues was related
to single function printer devices sold in Germany prior to December 31, 2007. For the period after 2007, the German copyright levy
laws were revised and the Company has been making payments under this revised copyright levy scheme related to single function
printers sold in Germany.
The VerwertungsGesellschaft Wort (“VG Wort”), a collection society representing certain copyright holders, instituted legal
proceedings against Hewlett-Packard Company (“HP”) in July of 2004 relating to whether and to what extent copyright levies for
photocopiers should be imposed in accordance with copyright laws implemented in Germany on single function printers. The
Company is not a party to this lawsuit, although the Company and VG Wort entered into an agreement in October 2002 pursuant to
which both VG Wort and the Company agreed to be bound by a decision of the court of final appeal in the VG Wort/HP litigation. On
December 6, 2007, the Bundesgerichtshof (the “German Federal Supreme Court”) in the VG Wort litigation with HP issued a
judgment that single function printer devices sold in Germany prior to December 31, 2007 are not subject to levies under the then
existing law (German Federal Supreme Court, file reference I ZR 94/05). VG Wort filed an appeal with the Bundesverfassungsgericht
(the “German Federal Constitutional Court”) challenging the ruling that single function printers are not subject to levies. On
September 21, 2010, the German Federal Constitutional Court published a decision holding that the German Federal Supreme Court
erred by not considering referring questions on interpretation of German copyright law to the Court of Justice of the European
Communities (“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 submitted several questions regarding the interpretation of
Directive 2001/29/EC on the harmonization of certain aspects of copyright and related rights in the information society to the CJEU
for a decision. The CJEU issued its opinion on June 27, 2013 and the matter has been remitted back to the German Federal Supreme
Court for further proceedings. On July 3, 2014, the German Federal Supreme Court announced its judgment finding that single
function printers are covered under the pre-2008 German copyright levy laws and remanded the matter back to the lower courts to
assess the amount of any such copyright levy.
In December 2009, VG Wort instituted non-binding arbitration proceedings against the Company before the arbitration board of the
Patent and Trademark Office in Munich relating to whether, and to what extent, copyright levies should be imposed on single function
printers sold by the Company in Germany from 2001 to 2007. In its submissions to the Patent and Trademark Office in Munich the
Company asserted that all claims for levies on single function printers sold by the Company in Germany should be dismissed. On
February 22, 2011 the arbitration board issued a partial decision finding that the claims of VG Wort for the years 2001 through 2005
are time barred by the statute of limitations. On October 27, 2011, the arbitration board further found that the copyright levy claims for
single function printers for the years 2006 and 2007 should be dismissed pursuant to the October 2002 agreement between the
Company and VG Wort finding the parties agreed to be bound by the judgment of the German Federal Supreme Court of December 6,
2007 which dismissed VG Wort’s copyright levy claims for single function printers. VG Wort has filed objections against these non-
binding decisions and, on April 25, 2012, filed legal action against the Company in the Munich (Civil) Court of Appeals seeking to
collect copyright levies for single function printers sold by the Company in Germany from 2001 to 2007. In contesting VG Wort’s
filing, the Company is seeking the Munich (Civil) Court of Appeals’ determination that the Company does not owe copyright levies
for single function printers sold by the Company in Germany for the contested period. On June 6, 2013, the Munich (Civil) Court of
Appeals ruled that the Company’s payment obligation for single-function printers sold until 2007 is dependent on the final outcome of
the industry-wide litigation of VG Wort vs. HP described above. On June 26, 2013, the Company filed a complaint against denial of
leave of appeal with the German Federal Supreme Court. On June 12, 2014, the German Federal Supreme Court denied the
Company’s appeal. The Company has appealed the decision to the Bundesverfassungsgericht (the “German Federal Constitutional
Court”) challenging the lower court’s ruling.
The Company believes the amounts accrued represent its best estimate of the copyright fee issues currently pending and these accruals
are included in Accrued liabilities on the Consolidated Statements of Financial Position.
Other Litigation
There are various other lawsuits, claims, investigations and proceedings involving the Company that are currently pending. The
Company has determined that although a potential loss is reasonably possible for certain matters, that for such matters in which it is
possible to estimate a loss or range of loss, the estimate of the loss or estimate of the range of loss are not material to the Company’s
consolidated results of operations, cash flows or financial position.
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