Epson 2006 Annual Report Download - page 48

Seiko Epson Annual Report 2006
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(20) Epson faces risks related to procedures taken under anti-monopoly laws
There are occasions when Epson’s businesses are subject to procedures under anti-monopoly laws
or ordinances, such as the Law Concerning the Prohibition of Private Monopolization and Maintenance
of Fair Trade. Overseas authorities also sometimes conduct surveys or gather information on specific
fields of business, and as a part of that effort Epson will occasionally participate in, for example,
surveys of a general nature related to market situations or sales methods, etc. If Epson is subject to
such surveys or procedures, its sales activities might be interfered with and they might adversely
affect Epson’s results.
(21) Epson is at risk of material legal actions being brought against it
Epson conducts its businesses both in Japan and overseas; its primary businesses being the devel-
opment, manufacture, and sales of information-related equipment, electronic devices, and precision
equipment. Given the special nature of its businesses, there is a possibility that an action could be
brought or legal proceedings could be started against it regarding, for example, intellectual property
rights, product liability, anti-monopoly laws, and environmental regulations. Should that happen,
society’s trust in Epson might be harmed, and resolving and responding to the issue might require
considerable expense and management resources. The results of the action or legal proceedings
might also adversely affect Epson’s results or the development of Epson’s business in the future.
The material actions involving Epson that are pending are as follows:
1. United States class action concerning an Epson inkjet printer
Consolidated class action complaints are pending against Epson America, Inc. (“EAI”) in the United
States, wherein a certified class is seeking an injunction and unspecified damages arising from the
adequacy of Epson’s communication of ink levels in Epson ink jet cartridges. In February 2006, a
settlement between EAI and plaintiffs was preliminary approved by the court, but EAI has not yet
received a final approval as of June 26, 2006.
2. Action concerning payment of copyright fees in Germany
The German organization for collecting copyright fees, Verwertungsgesellschaft Wort, has brought
an action against Epson Deutschland GmbH (“EDG”), a consolidated subsidiary of the Company,
to seek payment of copyright fees, claiming that a type of printer that Epson sells corresponds to
equipment for the private copying of copyright works, which is subject to copyright fees. The trial
court of this action decided that the printer is subject to a copyright fee and handed down its
verdict demanding that EDG pay the copyright fee at a rate of between 10 to 256.70 euro per
printer depending on the printer’s printable pages per minute. Unhappy with this decision, EDG
has subsequently appealed to a higher court. Although it is difficult to predict the result of the
action or even when the decision will be handed down, if the decision is unfavorable to Epson,
Epson’s results might consequently be affected.
(22) Epson is vulnerable to risks inherent in its tie-ups with other companies
One of Epson’s options for business strategies is to enter tie-ups with other companies. But if any
sort of adverse situation arises between the parties in the tie-up, there is a possibility the tie-ups will
be dissolved. There is also no assurance that the business strategy will succeed through the tie-ups
exactly as expected or that they will contribute to Epson’s results.