Cisco 2014 Annual Report Download - page 40

Item 3. Legal Proceedings
Brazil Brazilian authorities have investigated our Brazilian subsidiary and certain of its current and former employees, as well
as a Brazilian importer of our products, and its affiliates and employees, relating to alleged evasion of import taxes and alleged
improper transactions involving the subsidiary and the importer. Brazilian tax authorities have assessed claims against our
Brazilian subsidiary based on a theory of joint liability with the Brazilian importer for import taxes, interest, and penalties. In
addition to claims asserted by the Brazilian federal tax authorities in prior fiscal years, tax authorities from the Brazilian state
of Sao Paulo have asserted similar claims on the same legal basis in prior fiscal years. In the first quarter of fiscal 2013, the
Brazilian federal tax authorities asserted an additional claim against our Brazilian subsidiary based on a theory of joint liability
with respect to an alleged underpayment of income taxes, social taxes, interest, and penalties by a Brazilian distributor.
The asserted claims by Brazilian federal tax authorities are for calendar years 2003 through 2008, and the asserted claims by
the tax authorities from the state of Sao Paulo are for calendar years 2005 through 2007. The total asserted claims by Brazilian
state and federal tax authorities aggregate to approximately $389 million for the alleged evasion of import and other taxes,
approximately $1.3 billion for interest, and approximately $1.7 billion for various penalties, all determined using an exchange
rate as of July 26, 2014. We have completed a thorough review of the matters and believe the asserted claims against our
Brazilian subsidiary are without merit, and we are defending the claims vigorously. While we believe there is no legal basis for
the alleged liability, due to the complexities and uncertainty surrounding the judicial process in Brazil and the nature of the
claims asserting joint liability with the importer, we are unable to determine the likelihood of an unfavorable outcome against
our Brazilian subsidiary and are unable to reasonably estimate a range of loss, if any. We do not expect a final judicial
determination for several years.
Russia and the Commonwealth of Independent States At the request of the U.S. Securities and Exchange Commission (SEC)
and the U.S. Department of Justice, we are conducting an investigation into allegations which we and those agencies received
regarding possible violations of the U.S. Foreign Corrupt Practices Act involving business activities of Cisco’s operations in
Russia and certain of the Commonwealth of Independent States, and by certain resellers of our products in those countries. We
take any such allegations very seriously and are fully cooperating with and sharing the results of our investigation with the
SEC and the Department of Justice. While the outcome of our investigation is currently not determinable, we do not expect
that it will have a material adverse effect on our consolidated financial position, results of operations, or cash flows. The
countries that are the subject of the investigation collectively comprise less than 2% of our revenues.
Rockstar We and some of our service provider customers are subject to patent claims asserted in December 2013 in the
Eastern District of Texas and the District of Delaware by subsidiaries of the Rockstar Consortium (“Rockstar”). Rockstar,
whose members include Apple, Microsoft, LM Ericsson, Sony, and Blackberry, purchased a portfolio of patents out of the
Nortel Networks’ bankruptcy proceedings (the “Nortel Portfolio”). Rockstar’s subsidiaries allege that some of our NGN
Routing, Switching and Collaboration products, as well as video solutions deployed by our service provider customers,
infringe some of the patents in the Nortel Portfolio. Rockstar seeks monetary damages. A trial date for one service provider
customer has been set for October 2015; no other trial dates have been set. We have various defenses to the patent
infringement allegations, and have various offensive claims against Rockstar and some of its consortium members available to
us as well, and we will also explore alternative means of resolution. Due to the uncertainty surrounding the litigation process,
which involves numerous lawsuits and parties, we are unable to reasonably estimate the ultimate outcome and a range of loss,
if any, of these litigations at this time.
In addition, we are subject to legal proceedings, claims, and litigation arising in the ordinary course of business, including
intellectual property litigation. While the outcome of these matters is currently not determinable, we do not expect that the
ultimate costs to resolve these matters will have a material adverse effect on our consolidated financial position, results of
operations, or cash flows. For additional information regarding intellectual property litigation, see “Part I, Item 1A. Risk
Factors-We may be found to infringe on intellectual property rights of others” herein.
Item 4. Mine Safety Disclosures
Not Applicable.
32