HP 2009 Annual Report Download - page 29

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 may 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
on these types of devices. If imposed, the total amount of the copyright levies would depend on the
types of products determined to be subject to the levy, the number of units of those products sold
during the period covered by the levy, and the per unit fee for each type of product, all of which may
be affected by several factors, including the outcome of ongoing litigation involving HP and other
industry participants and possible action by the legislative bodies in the applicable countries, which
could be substantial. Consequently, the ultimate impact of these potential copyright levies or similar
fees, and the ability of HP to recover such amounts through increased prices, remain uncertain.
Due to the international nature of our business, political or economic changes or other factors could harm
our future revenue, costs and expenses and financial condition.
Sales outside the United States make up approximately 64% of our net revenue. In addition, an
increasing portion of our business activity is being conducted in emerging markets, including Brazil,
Russia, India and China. Our future revenue, gross margin, expenses and financial condition could
suffer due to a variety of international factors, including:
• ongoing instability or changes in a country’s or region’s economic or political conditions,
including inflation, recession, interest rate fluctuations and actual or anticipated military or
political conflicts;
• longer accounts receivable cycles and financial instability among customers;
• trade regulations and procedures and actions affecting production, pricing and marketing of
products;
• local labor conditions and regulations;
• managing a geographically dispersed workforce;
• changes in the regulatory or legal environment;
• differing technology standards or customer requirements;
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