Dell 2010 Annual Report Download - page 96

Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
fully briefed, and oral argument on the appeal was heard by the Fifth Circuit Court of Appeals on September 1, 2009. On
November 20, 2009, the parties to the appeal entered into a written settlement agreement whereby Dell would pay $40 million to the
proposed class and the plaintiff would dismiss the pending litigation. The settlement was preliminarily approved by the District
Court on December 21, 2009. The settlement was subject to certain conditions, including opt-outs from the proposed class not
exceeding a specified percentage and final approval by the District Court. During the first quarter of Fiscal 2011, the original opt-
out period in the notice approved by the District Court expired without the specified percentage being exceeded. The District Court
subsequently granted final approval for the settlement and entered a final judgment on July 20, 2010. Dell paid $40 million into an
escrow account to satisfy this settlement and discharged the liability during the second quarter of Fiscal 2011. Certain objectors to
the settlement have filed notices of appeal to the Fifth Circuit Court of Appeals with regard to approval of the settlement. While
there can be no assurances with respect to litigation, we believe it is unlikely that the settlement will be overturned on appeal.
Copyright Levies — In many European Union ("EU") member countries, there are requirements to collect and remit levies to
collecting societies based on sales of certain devices. These levies apply to Dell and others in the industry. The amount of levies is
generally based upon the number of products sold and the per-product amounts of the levies. Levies are intended to compensate
copyright holders for "fair use" copying of copyrighted materials. The collecting societies then distribute the levies to copyright
holders. Some EU member countries that do not yet have levies on digital devices are expected to implement similar legislation to
enable them to extend existing levy schemes, while some other EU member countries are expected to limit the scope of levy
schemes and their applicability in the digital hardware environment. Dell, other companies and various industry associations have
opposed the extension of levies to the digital environment and have advocated alternative models of compensation to rights holders.
As described below, there are multiple proceedings involving Dell or its competitors in certain EU member countries, where
plaintiffs are seeking to impose or modify levies upon equipment (such as multifunction devices, phones, personal computers
("PCs") and printers), alleging that these devices enable copying of copyrighted materials. Even if Dell is not a party to all these
proceedings, however, the decisions could impact Dell's business and the amount of copyright levies Dell may be required to
collect. These various proceeding also challenge whether the levy schemes in those countries comply with EU law.
There are multiple proceedings in Germany that could impact Dell's obligation to collect and remit levies in Germany. In July 2004,
VG Wort, a German collecting society, filed a lawsuit against Hewlett-Packard Company ("HP") in the Stuttgart Civil Court
seeking copyright levies on printers. On December 22, 2004, the court held that HP was liable for payments regarding all printers
using ASCII code sold in Germany. HP appealed the decision and after an intermediary ruling upholding the trial court's decision,
the German Federal Supreme Court ("GFSC") in December 2007 issued a judgment that printers are not subject to levies under the
German copyright law that was in effect until December 31, 2007. Based upon the GFSC's ruling, Dell concluded there was no
obligation for Dell to collect or accrue levies for printers sold by it prior to December 31, 2007. VG Wort filed a claim with the
German Constitutional Court ("GCC") challenging the GFSC's ruling that printers are not subject to levies. On September 21, 2010,
the GCC revoked the GFSC decision and referred the case back to the GFSC to determine if the ruling gave due credit to the
copyright owner's property rights under the German Constitution and whether the GFSC should have referred the case to the
European Court of Justice ("ECJ"). The GFSC has set a hearing date of March 24, 2011. Dell believes that the GFSC can decide to
refer the case to the ECJ, confirm its prior decision, or conclude that printers are subject to levies under German law. Dell has not
accrued any liability in this matter, as Dell does not believe there is a probable and estimable claim.
In a separate matter, on December 29, 2005, Zentralstelle Für private Überspielungrechte ("ZPÜ"), a joint association of various
German collecting societies, instituted arbitration proceedings against Dell's German subsidiary before the Board of Arbitration at
the German Patent and Trademark Office ("Arbitration Body") in Munich. ZPÜ claimed an audio-video levy of €18.42 for each PC
sold by Dell in Germany from January 1,
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