Epson 2009 Annual Report Download - page 24

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13. Fluctuations in foreign currency exchanges create risks for Epson
A significant portion of Epson’ s sales are denominated in U.S. dollars or the euro. Epson is continuing to
expand its overseas procurement and move its production sites overseas, thereby attracting an increase in
expenses in foreign currencies linked to the euro or U.S. dollar, and, although its U.S. dollar-denominated
sales countervail its U.S. dollar-denominated expenses, its euro-denominated sales are still greater than its
euro-denominated expenses. Also, although Epson has executed currency forwards and currency options
to hedge against the risks inherent in foreign currency exchanges, unfavorable movements in the exchange
rates of foreign currencies such as the U.S. dollar or euro against the yen could adversely affect Epson’ s
financial situation or business results.
14. There are risks inherent in pension systems
Epson has established a defined-benefit pension plan (fund-type), a defined-benefit pension plan
(contract-type), a tax qualified pension plan and a termination allowance plan.
If, with respect to the defined-benefit pension-type retirement pension plan, there is a change in the
operating results of the pension assets or in the ratio used as the basis for calculating retirement allowance
liabilities, Epson’ s results could consequently be adversely affected.
15. Epson’s intellectual property rights activities expose Epson to certain risks
Patent rights and other intellectual property rights are extremely important to Epson for maintaining its
competitiveness. Epson has itself developed many of the technologies it needs, and it utilizes them as
intellectual property in the form of products or technologies by acquiring patent rights, trademark rights
and other intellectual property rights for them or entering into agreements with other companies for them.
Epson carefully selects the personnel who manage its intellectual properties and is constantly working to
strengthen its intellectual property portfolio.
If, however, any of the following situations relating to intellectual properties occurs, Epson’ s results could
consequently be affected.
1) An objection might be raised or an application to invalidate might be filed against an intellectual
property right of Epson, and as a result, that right might be recognized as invalid.
2) A third party to whom Epson originally had not granted a license might come to possess a license as a
result of a merger with or acquisition of another third party, and Epson's competitive advantage that it
had due to that license might consequently be lost.
3) New restrictions might be imposed on an Epson business that were originally not imposed on it as a
result of a merger with or acquisition of a third party, and it might be forced to spend money to find a
solution to those restrictions.
4) Intellectual property rights that Epson holds might not give it a competitive advantage or Epson might
not be able to use them effectively.
5) Epson or one of its customers might be subject to a third-party's claim of an infringement of
intellectual property rights and have to spend a considerable amount of time and money to resolve the
issue, or such a claim might interfere with Epson's management or focusing of managerial resources.
6) If a third-party’ s claim of infringement of intellectual property right is upheld, Epson might incur
damage in the form of having to pay considerable compensation or royalties or stop using the
applicable technology.
7) A suit might be brought against Epson for payment of remuneration to employees or the like for their
inventions or the like, which would mean Epson might be forced to spend a considerable amount of
time and money to resolve the issue and, as a result, might be required to pay a considerable amount
of money in remuneration.
16. Problems may arise relating to the quality of Epson’s products
The existence of quality guarantees on Epson’ s products and the details of those guarantees differ from
customer to customer, depending on the agreement it has entered into with them. If there is a defect in an
Epson product or it does not conform to the required standard and consequently costs must be incurred to
repair defects (such as by replacing or repairing the product) or the product causes damage to a person or
property, then there is a possibility Epson might be subject to, for example, product liability.
Also, Epson might be held liable to a customer and might incur expenses for repairs or corrections on the
grounds that it did not adequately display or explain an Epson product’ s performance. Furthermore, if
such a problem in quality arises with respect to Epson products, Epson might lose the trust of others in its
products, lose major customers or experience a drop in demand for those products, any of which might
adversely affect Epson’ s results.