Epson 2015 Annual Report Download - page 21

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As of the date we submitted our Annual Securities Report, Epson was contending with the following material
actions.
In Germany, the organization for collecting copyright fees on behalf of copyright holders,
Verwertungsgesellschaft Wort (“VG Wort”), has brought a series of legal actions seeking payment of copyright
fees against importers and vendors of PCs, printers and other digital equipment that is capable of reproducing
copyrighted works.
In January 2004, VG Wort brought a civil action against Epson Deutschland GmbH (“EDG”), a consolidated
subsidiary of Seiko Epson, to seek payment of copyright fees on single-function printers. The court initially
ruled that single-function printers are subject to a copyright fee and decreed that EDG pay the fee at a rate of
between 10 to 256.70 euros per printer depending on the printer’s printable pages per minute. However, the
claim was dismissed by the appeals court and the Supreme Court. The plaintiff, however, unsatisfied with this
ruling, appealed to the Federal Constitutional Court of Germany. In December 2010, the Federal Constitutional
Court ruled that the August 2008 ruling of the Supreme Court violates rights set forth in Article 14 of the
constitutional law of Germany. It thus dismissed the ruling of the Supreme Court and referred the case back to
the Supreme Court for review. Then, in July 2011, the Supreme Court referred the case to the Court of Justice of
the European Union, and an inquiry was begun in October 2012, but in June 2013 the Court of Justice of the
European Union issued a ruling that would allow EU member states to impose copyright fees on printer and PC
manufacturers. In response to this ruling, the Supreme Court, in July 2014, also ruled that printers and PCs are
subject to copyright fees, and the high court began an appellate review of specific copyright fees.
Companies in general, including Epson, and industry organizations are showing a willingness to take a stance
against the expansion of the scope of such copyright fees.
In June 2010, Epson Europe B.V. (“EEB”), a consolidated subsidiary of Seiko Epson, brought a civil suit
against La SCRL Reprobel (“Reprobel”), a Belgium-based group that collects copyright royalties, seeking
restitution for copyright royalties for multifunction printers. With Reprobel subsequently filing a suit against
EEB, the two lawsuits were adjoined. EEB’s claims were rejected at the first trial, but EEB, dissatisfied with the
decision, intends to appeal.
Apart from this, civil actions have been brought against Epson and certain of our consolidated subsidiaries by
customers in the United States, regarding allegations of involvement in a liquid crystal display price-fixing
cartel.
It is difficult at this time to predict the outcome of these civil actions and when they may be settled, but our
operating results and future business could be affected, depending on the outcomes of suits and legal
proceedings.
15. Epson is vulnerable to certain risks in internal control over financial reporting.
We are building and using internal controls to ensure the reliability of financial reporting. With the
establishment and operation of internal controls for financial reporting high on our list of important
management issues, we have been pursuing a Groupwide effort to audit and improve corporate oversight of our
Group companies. However, since there is no assurance that we will be able to establish and operate an effective
internal control system on a continuous basis, and since there are inherent limitations to internal control systems,
if the internal controls that Epson implements fail to function effectively, or if there are deficiencies in internal
control over financial reporting or material weaknesses in the internal controls, it might adversely affect the
reliability of our financial reporting.
16. Epson is vulnerable to risks inherent in its tie-ups with other companies.
One of our business strategy options is to enter into business tie-ups with other companies. However, the parties
may review the arrangements of tie-ups, and there is a possibility that tie-ups could be dissolved or be subject to
changes. There is also no assurance that the business strategy of tie-ups will succeed or contribute to our
operating results exactly as expected.
17. Epson could be severely affected in the event of a natural or other disaster.
We have research and development, procurement, manufacturing, logistics, sales and service sites around the
globe, and our operating results could be adversely affected by any number of unpredictable events, including
but not limited to natural disasters, pandemics involving new strains of the influenza virus, infection by
computer viruses, leaks or theft of customer data, failures of mission-critical internal IT systems, supply chain
disruptions, and acts of terrorism or war.