HP 2008 Annual Report Download - page 24

overlaps in the current products and services of HP and portfolios acquired through mergers and
acquisitions that we must manage. In addition, it may be difficult to ensure performance of new
customer contracts in accordance with our revenue, margin and cost estimates and to achieve
operational efficiencies embedded in our estimates. Given the competitive nature of our industry, if any
of these risks materializes, future demand for our products and services and our results of operations
may suffer.
Our revenue, cost of sales, and expenses may suffer if we cannot continue to license or enforce the
intellectual property rights on which our businesses depend or if third parties assert that we violate their
intellectual property rights.
We rely upon patent, copyright, trademark and trade secret laws in the United States, similar laws
in other countries, and agreements with our employees, customers, suppliers and other parties, to
establish and maintain intellectual property rights in the technology and products we sell, provide or
otherwise use in our operations. However, any of our direct or indirect intellectual property rights
could be challenged, invalidated or circumvented, or such intellectual property rights may not be
sufficient to permit us to take advantage of current market trends or otherwise to provide competitive
advantages, either of which could result in costly product redesign efforts, discontinuance of certain
product offerings or other competitive harm. Further, the laws of certain countries do not protect
proprietary rights to the same extent as the laws of the United States. Therefore, in certain jurisdictions
we may be unable to protect our proprietary technology adequately against unauthorized third-party
copying or use; this too could adversely affect our competitive position.
Because of the rapid pace of technological change in the information technology industry, much of
our business and many of our products rely on key technologies developed or licensed by third parties.
We may not be able to obtain or to continue to obtain licenses and technologies from these third
parties at all or on reasonable terms, or such third parties may demand cross-licenses to our intellectual
property. In addition, it is possible that as a consequence of a merger or acquisition third parties may
obtain licenses to some of our intellectual property rights or our business may be subject to certain
restrictions that were not in place prior to the transaction. Consequently, we may lose a competitive
advantage with respect to these intellectual property rights or we may be required to enter into costly
arrangements in order to terminate or limit these rights.
Third parties also may claim that we or customers indemnified by us are infringing upon their
intellectual property rights. For example, in recent years individuals and groups have begun purchasing
intellectual property assets for the sole purpose of asserting claims of infringement and attempting to
extract settlements from large companies such as HP. If we cannot or do not license the infringed
technology at all or on reasonable terms, or substitute similar technology from another source, our
operations could be adversely affected. Even if we believe that the claims are without merit, they can
be time-consuming and costly to defend and divert management’s attention and resources away from
our business. Claims of intellectual property infringement also might require us to redesign affected
products, enter into costly settlement or license agreements, pay costly damage awards, or face a
temporary or permanent injunction prohibiting us from importing, marketing or selling certain of our
products. Even if we have an agreement to indemnify us against such costs, the indemnifying party may
be unable to uphold its contractual obligations to us.
Finally, our results of operations and cash flows could be affected in certain periods and on an
ongoing basis by the imposition, accrual and payment of copyright levies or similar fees. In certain
countries (primarily in Europe), proceedings are ongoing against HP in which groups representing
copyright owners seek to impose upon and collect from HP levies upon equipment (such as PCs,
multifunction devices and printers) that they allege are copying devices under applicable laws. Other
countries that have not imposed levies on these types of devices are expected to extend existing levy
schemes, and countries that do not currently have levy schemes may decide to impose copyright levies
18