HP 2013 Annual Report Download - page 37

We may not be able to obtain or 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, individuals and groups may purchase intellectual property
assets for the purpose of asserting claims of infringement and attempting to extract settlements from
companies such as HP and its customers. The number of these claims has increased in recent periods
and may continue to increase in the future. If we cannot or do not license infringed intellectual
property at all or on reasonable terms, or if we are required to substitute similar technology from
another source, our operations could be adversely affected. Even if we believe that intellectual property
claims are without merit, they can be time-consuming and costly to defend against 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 or unwilling to uphold its
contractual obligations to us.
Finally, our results of operations and cash flows have been and could continue to 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 or have been
concluded involving HP in which groups representing copyright owners have sought or are seeking to
impose upon and collect from HP levies upon equipment (such as PCs, MFDs and printers) alleged to
be copying devices under applicable laws. Other such groups have also sought to modify existing levy
schemes to increase the amount of the levies that can be collected from us. 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. The total amount of the copyright levies will 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 are affected by several factors, including the
outcome of ongoing litigation involving us and other industry participants and possible action by the
legislative bodies in the applicable countries, and could be substantial. Consequently, the ultimate
impact of these copyright levies or similar fees, and our ability to recover such amounts through
increased prices, remains uncertain.
Our revenue and profitability could suffer if we do not manage the risks associated with our services business
properly.
The risks that accompany our services business differ from those of our other businesses and
include the following:
• The success of our services business is to a significant degree dependent on our ability to retain
our significant services clients and maintain or increase the level of revenues from these clients.
We may lose clients due to their merger or acquisition, business failure, contract expiration or
their selection of a competing service provider or decision to in-source services. In addition, we
may not be able to retain or renew relationships with our significant clients. As a result of
business downturns or for other business reasons, we are also vulnerable to reduced processing
volumes from our clients, which can reduce the scope of services provided and the prices for
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