McKesson 2009 Annual Report Download - page 63

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
57
Future advances in the healthcare information systems industry could lead to new technologies, products or
services that are competitive with the technology products and services offered by our various businesses. Such
technological advances could also lower the cost of such products and services or otherwise result in competitive
pricing pressure or render our products obsolete. The success of our technology businesses will depend, in part, on
our ability to be responsive to technological developments, legislative initiatives, pricing pressures and changing
business models. To remain competitive in the evolving healthcare information systems marketplace, our
technology businesses must also develop new products on a timely basis. The failure to develop competitive
products and to introduce new products on a timely basis could curtail the ability of our technology businesses to
attract and retain customers and thereby could have an adverse impact on our results of operations.
The loss of third party licenses utilized by our technology businesses may adversely impact our operating
results.
We license the rights to use certain technologies from third-party vendors to incorporate in or complement our
various healthcare technology products and solutions, which are primarily offered through our Technology Solutions
segment. These licenses are generally nonexclusive, must be renewed periodically by mutual consent and may be
terminated if we breach the terms of the license. As a result, we may have to discontinue, delay or reduce product
shipments until we obtain equivalent technology, which could hurt our business. Our competitors may obtain the
right to use any of the technology covered by these licenses and use the technology to compete directly with us. In
addition, if our vendors choose to discontinue support of the licensed technology in the future, we may not be able to
modify or adapt our own products.
Proprietary technology protections may not be adequate and products may be found to infringe the rights of
third parties.
We rely on a combination of trade secret, patent, copyright and trademark laws, nondisclosure and other
contractual provisions and technical measures to protect our proprietary rights in our products and solutions. There
can be no assurance that these protections will be adequate or that our competitors will not independently develop
technologies that are substantially equivalent or superior to our technology. Although we believe that our products
do not infringe the proprietary rights of third parties, from time to time third parties have asserted infringement
claims against us and there can be no assurance that third parties will not assert infringement claims against us in the
future. If we were found to be infringing others’ rights, we may be required to pay substantial damage awards and
forced to develop non-infringing technology, obtain a license or cease selling the products that contain the infringing
technology. Additionally, we may find it necessary to initiate litigation to protect our trade secrets, to enforce our
patent, copyright and trademark rights and to determine the scope and validity of the proprietary rights of others.
These types of litigation can be costly and time consuming. These litigation expenses, damage payments or costs of
developing replacement technology could have an adverse impact on our results of operations.
System errors or failures of our products to conform to specifications could cause unforeseen liabilities.
The software and software systems (“systems”) that we sell or operate are very complex. As with complex
systems offered by others, our systems may contain errors, especially when first introduced. For example, our
Technology Solutions segment’s business systems are intended to provide information for healthcare providers in
providing patient care. Therefore, users of our systems have a greater sensitivity to errors than the general market
for software products. Failure of a client’s system to perform in accordance with our documentation could
constitute a breach of warranty and could require us to incur additional expense in order to make the system comply
with the documentation. If such failure is not remedied in a timely manner, it could constitute a material breach
under a contract, allowing the client to cancel the contract, obtain refunds of amounts previously paid or assert
claims for significant damages.