Cisco 2014 Annual Report Download - page 36

United States. The outcome of any actions taken in these foreign countries may be different than if such actions were determined
under the laws of the United States. Although we are not dependent on any individual patents or group of patents for particular
segments of the business for which we compete, if we are unable to protect our proprietary rights to the totality of the features
(including aspects of products protected other than by patent rights) in a market, we may find ourselves at a competitive
disadvantage to others who need not incur the substantial expense, time, and effort required to create innovative products that have
enabled us to be successful.
WE MAY BE FOUND TO INFRINGE ON INTELLECTUAL PROPERTY RIGHTS OF OTHERS
Third parties, including customers, have in the past and may in the future assert claims or initiate litigation related to exclusive
patent, copyright, trademark, and other intellectual property rights to technologies and related standards that are relevant to us.
These assertions have increased over time as a result of our growth and the general increase in the pace of patent claims
assertions, particularly in the United States. Because of the existence of a large number of patents in the networking field, the
secrecy of some pending patents, and the rapid rate of issuance of new patents, it is not economically practical or even possible to
determine in advance whether a product or any of its components infringes or will infringe on the patent rights of others. The
asserted claims and/or initiated litigation can include claims against us or our manufacturers, suppliers, or customers, alleging
infringement of their proprietary rights with respect to our existing or future products or components of those products.
Regardless of the merit of these claims, they can be time-consuming, result in costly litigation and diversion of technical and
management personnel, or require us to develop a non-infringing technology or enter into license agreements. Where claims are
made by customers, resistance even to unmeritorious claims could damage customer relationships. There can be no assurance that
licenses will be available on acceptable terms and conditions, if at all, or that our indemnification by our suppliers will be
adequate to cover our costs if a claim were brought directly against us or our customers. Furthermore, because of the potential for
high court awards that are not necessarily predictable, it is not unusual to find even arguably unmeritorious claims settled for
significant amounts. If any infringement or other intellectual property claim made against us by any third party is successful, if we
are required to indemnify a customer with respect to a claim against the customer, or if we fail to develop non-infringing
technology or license the proprietary rights on commercially reasonable terms and conditions, our business, operating results, and
financial condition could be materially and adversely affected. For additional information regarding our indemnification
obligations, see Note 12(g) to the Consolidated Financial Statements contained in this report.
Our exposure to risks associated with the use of intellectual property may be increased as a result of acquisitions, as we have a
lower level of visibility into the development process with respect to such technology or the care taken to safeguard against
infringement risks. Further, in the past, third parties have made infringement and similar claims after we have acquired
technology that had not been asserted prior to our acquisition.
WE RELY ON THE AVAILABILITY OF THIRD-PARTY LICENSES
Many of our products are designed to include software or other intellectual property licensed from third parties. It may be
necessary in the future to seek or renew licenses relating to various aspects of these products. There can be no assurance that
the necessary licenses would be available on acceptable terms, if at all. The inability to obtain certain licenses or other rights
or to obtain such licenses or rights on favorable terms, or the need to engage in litigation regarding these matters, could have a
material adverse effect on our business, operating results, and financial condition. Moreover, the inclusion in our products of
software or other intellectual property licensed from third parties on a nonexclusive basis could limit our ability to protect our
proprietary rights in our products.
OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED AND DAMAGE TO OUR REPUTATION MAY
OCCUR DUE TO PRODUCTION AND SALE OF COUNTERFEIT VERSIONS OF OUR PRODUCTS
As is the case with leading products around the world, our products are subject to efforts by third parties to produce counterfeit
versions of our products. While we work diligently with law enforcement authorities in various countries to block the
manufacture of counterfeit goods and to interdict their sale, and to detect counterfeit products in customer networks, and have
succeeded in prosecuting counterfeiters and their distributors, resulting in fines, imprisonment and restitution to us, there can
be no guarantee that such efforts will succeed. While counterfeiters often aim their sales at customers who might not have
otherwise purchased our products due to lack of verifiability of origin and service, such counterfeit sales, to the extent they
replace otherwise legitimate sales, could adversely affect our operating results.
OUR OPERATING RESULTS AND FUTURE PROSPECTS COULD BE MATERIALLY HARMED BY
UNCERTAINTIES OF REGULATION OF THE INTERNET
Currently, few laws or regulations apply directly to access or commerce on the Internet. We could be materially adversely affected
by regulation of the Internet and Internet commerce in any country where we operate. Such regulations could include matters such
as voice over the Internet or using IP, encryption technology, sales or other taxes on Internet product or service sales, and access
charges for Internet service providers. The adoption of regulation of the Internet and Internet commerce could decrease demand
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