LensCrafters 2013 Annual Report Download - page 27

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Additionally, our Oakley and Eye Safety Systems subsidiaries are U.S. government contractors and, as a result, we
must comply with, and are affected by, U.S. laws and regulations related to conducting business with the U.S. government.
These laws and regulations, including requirements to obtain applicable governmental approvals, clearances and certain
export licenses, may impose additional costs and risks on our business. We also may become subject to audits, reviews and
investigations of our compliance with these laws and regulations.
If we are unable to protect our proprietary rights, our sales might suffer, and we may incur significant additional costs to
defend such rights.
We rely on trade secret, unfair competition, trade dress, trademark, patent and copyright laws to protect our rights to
certain aspects of our products and services, including product designs, proprietary manufacturing processes and
technologies, product research and concepts and goodwill, all of which we believe are important to the success of our
products and services and our competitive position. However, pending trademark or patent applications may not in all
instances result in the issuance of a registered trademark or patent, and trademarks or patents granted may not be effective in
thwarting competition or be held valid if subsequently challenged. 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 coexist in the market with
competitors utilizing the same or similar intellectual property, (ii) require us to grant licenses to, or obtain licenses from, third
parties, (iii) prevent us from manufacturing or selling our products, (iv) require us to discontinue the use of a particular
patent, trademark, copyright or trade secret or (v) subject us to substantial liability. Any of these possibilities could have a
material adverse effect on our business by reducing our future sales or causing us to incur significant costs to defend our
rights.
If we are unable to maintain our current operating relationship with host stores of our retail 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 retail 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.
If we fail to maintain an efficient distribution network or if there is a disruption to our critical manufacturing plants or
distribution network in highly competitive markets, our business, results of operations and financial condition could suffer.
The mid- and premium-price categories of the prescription frame and sunglasses markets in which we operate are
highly competitive. We believe that, in addition to successfully introducing new products, responding to changes in the
market environment and maintaining superior production capabilities, our ability to remain competitive is highly dependent
on our success in maintaining an efficient distribution network. If we are unable to maintain an efficient distribution network
or if there is a significant disruption to our plants or network, our sales may decline due to the inability to timely deliver