LensCrafters 2010 Annual Report Download - page 61

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MANAGEMENT
REPORT
In addition, the actions we take to protect our proprietary rights may be inadequate to prevent imitation of our products
and services. Our proprietary information could become known to competitors, and we may not be able to meaningfully
protect our rights to proprietary information. Furthermore, other companies may independently develop substantially
equivalent or better products or services that do not infringe on our intellectual property rights or could assert rights in,
and ownership of, our proprietary rights. Moreover, the laws of certain countries do not protect proprietary rights to the
same extent as the laws of the United States or of the member states of the European Union.
Consistent with our strategy of vigorously defending our intellectual property rights, we devote substantial resources
to the enforcement of patents issued and trademarks granted to us, to the protection of our trade secrets or other
intellectual property rights and to the determination of the scope or validity of the proprietary rights of others that might
be asserted against us. However, if the level of potentially infringing activities by others were to increase substantially, we
might have to significantly increase the resources we devote to protecting our rights. From time to time, third parties may
assert patent, copyright, trademark or similar rights against intellectual property that is important to our business.
The resolution or compromise of any litigation or other legal process to enforce such alleged third party rights, regardless
of its merit or resolution, could be costly and divert the efforts and attention of our management. We may not prevail in
any such litigation or other legal process or we may compromise or settle such claims because of the complex technical
issues and inherent uncertainties in intellectual property disputes and the significant expense in defending such claims.
An adverse determination in any dispute involving our proprietary rights could, among other things, (i) require us to grant
licenses to, or obtain licenses from, third parties, (ii) prevent us from manufacturing or selling our products, (iii) require us
to discontinue the use of a particular patent, trademark, copyright or trade secret or (iv) subject us to substantial liability.
Any of these possibilities could have a material adverse effect on our business including by reducing our future sales or
causing us to incur significant costs to defend our rights.
L) IF WE ARE UNABLE TO MAINTAIN OUR CURRENT OPERATING RELATIONSHIP WITH HOST STORES OF OUR
LICENSED BRANDS DIVISION, WE COULD SUFFER A LOSS IN SALES AND POSSIBLE IMPAIRMENT OF CERTAIN
INTANGIBLE ASSETS
Our sales depend in part on our relationships with the host stores that allow us to operate our Licensed Brands division,
including Sears Optical and Target Optical. Our leases and licenses with Sears Optical are terminable upon short notice.
If our relationship with Sears Optical or Target Optical were to end, we would suffer a loss of sales and the possible
impairment of certain intangible assets. This could have a material adverse effect on our business, results of operations,
financial condition and prospects.
M) IF WE WERE TO BECOME SUBJECT TO ADVERSE JUDGMENTS OR DETERMINATIONS IN LEGAL
PROCEEDINGS TO WHICH WE ARE, OR MAY BECOME, A PARTY, OUR FUTURE PROFITABILITY COULD SUFFER
THROUGH A REDUCTION OF SALES OR INCREASED COSTS
We are currently a party to certain legal proceedings as described in Note 26 to the consolidated financial statements as
of December 31, 2010. In addition, in the ordinary course of our business, we become involved in various other claims,
lawsuits, investigations and governmental and administrative proceedings, some of which are or may be significant.
Adverse judgments or determinations in one or more of these proceedings could require us to change the way we do
business or use substantial resources in adhering to the settlements and could have a material adverse effect on our
business, including, among other consequences, by significantly increasing the costs required to operate our business.
N) LEONARDO DEL VECCHIO, OUR CHAIRMAN AND PRINCIPAL STOCKHOLDER, CONTROLS 67.2 PERCENT
OF OUR VOTING POWER AND IS IN A POSITION TO AFFECT OUR ONGOING OPERATIONS, CORPORATE
TRANSACTIONS AND ANY MATTERS SUBMITTED TO A VOTE OF OUR STOCKHOLDERS, INCLUDING THE
ELECTION OF DIRECTORS AND A CHANGE IN CORPORATE CONTROL
As of February 28, 2011, Mr. Leonardo Del Vecchio, the Chairman of our Board of Directors, through the company Delfin
S.à r.l., has voting rights over 313,253,339 Ordinary Shares, or 67.2 percent of the outstanding Ordinary Shares. As a
result, Mr. Del Vecchio has the ability to exert significant influence over our corporate affairs and to control the outcome