Canon 2008 Annual Report Download - page 93

9
1
Gua
r
a
n
tees
Canon provides guarantees for bank loans of its employees,
a
ffi
liates and other companies. The guarantees
f
or the employees
are principall
y
made
f
or their housin
g
loans. The
g
uarantees o
f
loans of its affi liates and other com
p
anies are made to ensure
that those com
p
anies o
p
erate with less fi nancial risk
.
For each guarantee provided, Canon would have to perform
under a
g
uarantee i
f
the borrower de
f
aults on a pa
y
ment
within the contract periods o
f
1
y
ear to 30
y
ears, in the case o
f
employees with housing loans, and of 1 year to 10 years, in the
case of affi liates and other com
p
anies. The maximum amount of
un
d
iscounte
d
payments Canon wou
ld
h
ave
h
a
d
to ma
k
e in
the event of default is ¥22,308 million
(
$245,143 thousand
)
at
December 31, 2008. The carr
y
in
g
amounts o
f
the liabilities
reco
g
nized
f
or Canon’s obli
g
ations as a
g
uarantor under those
guarantees at December 31, 2008 were not signifi cant
.
Canon also issues contractual
p
roduct warranties under
which it generally guarantees the per
f
ormance o
f
products
delivered and services rendered
f
or a certain period or term.
Chan
g
es in accrued product warrant
y
cost for the
y
ears ended
December 31, 2008 and 2007 are summarized as follows
:
Y
ears en
d
e
d
Decem
b
er 3
1
M
illions o
f
ye
n
Th
ousa
n
ds
o
f
U.S. dollar
s
2008
2007
2008
Balance at be
g
innin
g
of
y
ear ¥ 20,138 ¥ 1
8
,14
4
$ 221,297
Add
ition 30,644 31
,
053 336,747
Ut
iliz
at
i
on
(26,846)
(
26,199
)
(295,011)
Ot
h
er
(6,564) (2,860) (72,132)
Balance at end o
f
yea
r
¥ 17,372 ¥ 20
,
138 $ 190,901
Le
g
al proceedin
gs
In October 2003, a lawsuit was
fi
led b
y
a
f
ormer emplo
y
ee
against t
h
e Company at t
h
e To
k
yo District Court in Japan. T
h
e
lawsuit alleges that the former employee is entitled to ¥45,872
million
($
504,088 thousand
)
as reasonable remuneration for an
invention related to certain technolo
gy
used b
y
the Compan
y
,
and the former emplo
y
ee has sued for a partial pa
y
ment of
¥1,000 million
(
$10,989 thousand
)
and interest thereon. On
January 30, 2007, the Tokyo District Court of Japan ordered the
Compan
y
to pa
y
the
f
ormer emplo
y
ee approximatel
y
¥33.5
million (
$
368 thousand) and interest thereon. On the same da
y
,
t
h
e Company appea
l
e
d
t
h
e
d
ecision. On Fe
b
ruary 26, 2009, t
h
e
Intellectual Property High Court of Japan issued a judgment in
the appellate court review and ordered the Company to pay the
former emplo
y
ee approximatel
y
¥69.6 million (
$
765 thousand),
consistin
g
of reasonable remuneration of approximatel
y
¥56.3
million
(
$619 thousand
)
and interest thereon. On March 12,
2009, the Company appealed the decision to the Supreme Court
.
In German
y
, Verwertun
g
s
g
esellscha
f
t Wort (“VG Wort”), a
co
ll
ectin
g
a
g
enc
y
representin
g
certain cop
y
ri
gh
t
h
o
ld
ers,
h
as
fi led a series of lawsuits seeking to impose copyright levies upon
digital products such as PCs and printers, that allegedly enable
the reproduction o
f
copyrighted materials, against the companies
importin
g
and distributin
g
these di
g
ital products. In Ma
y
2004,
VG Wort fi led a civil lawsuit a
g
ainst Hewlett-Packard GmbH
seeking levies on multi-function printers sold in Germany during
the period from 1997 through 2001. This is an industry test case
under which Hewlett-Packard GmbH represents other companies
s
h
arin
g
common interests, an
d
Canon
h
as un
d
erta
k
en to
b
e
bound by the fi nal decision of this court case. In 2008, the
Federal Supreme Court delivered its short judgment in favor of
VG Wort, whereby the court decided that,
f
or MFPs sold during
the period
f
rom 1997 throu
g
h 2001, the same
f
ull tari
ff
as
applicable to photocopier (EUR38.35 to EUR 613.56 per unit,
dependin
g
on the printin
g
speed and color printin
g
capabilit
y
)
should be a
pp
lied. Hewlett-Packard GmbH fi led a claim with the
Federal Constitutional Court challenging the judgment of the
Federal Supreme Court in Au
g
ust 2008. For the multi-
f
unction
printers sold durin
g
the period
f
rom 2002 throu
g
h 2007, VG Wort
made a re
q
uest for arbitration with Canon before an arbitration
court in January 2007, and the arbitration court delivered their
settlement proposal in December 2008. However, VG Wort
re
j
ecte
d
suc
h
sett
l
ement proposa
l
s in Januar
y
2009. VG Wort is
now able to transfer this case to a court of appeals. With re
g
ard
to single-function printers, VG Wort fi led a separate lawsuit in
January 2006 against Canon seeking payment o
f
copyright levies,
and the court o
f
fi
rst instance in Düsseldor
f
ruled in
f
avor o
f
the
c
l
aim
by
VG Wort in Novem
b
er 2006. Canon
l
o
dg
e
d
an appea
l
against such decision in December 2006 before the court of
appeals in Düsseldorf. Following a dicision by the same court of
appeals in Düsseldor
f
on January 23, 2007 in relation to a similar
court case seekin
g
cop
y
ri
g
ht levies on sin
g
le-
f
unction printers o
f
Epson Deutsc
hl
an
d
Gm
b
H, Xerox Gm
b
H an
d
K
y
ocera Mita
Deutsc
hl
an
d
Gm
b
H, w
h
ere
b
y t
h
e court rejecte
d
suc
h
a
ll
ege
d
levies, in its judgment of November 13, 2007, the court of
appeals re
j
ected VG Wort’s claim a
g
ainst Canon. VG Wort
appealed
f
urther a
g
ainst said decision o
f
the court o
f
appeals
before the Federal Su
p
reme Court. In December 2007, for a
similar Hewlett-Packard GmbH case relating to single-function
printers, the Federal Supreme Court delivered its judgment in
f
avor o
f
Hewlett-Packard GmbH and dismissed VG Wort’s claim.
VG Wort has alread
y
fi led a constitutional complaint with the
Federal Constitutional Court against said judgment of the Federal
Supreme Court. Canon, other companies and the industry
associations have expressed opposition to such extension o
f
t
h
e
l
ev
y
scope. Base
d
on in
d
ustr
y
opposition to t
h
e extension