McKesson 2012 Annual Report Download - page 23

McKESSON CORPORATION
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Proprietary 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
products or solutions that are equivalent or superior to ours. In addition, despite protective measures, we may be
subject to unauthorized use of our technology due to copying, reverse-engineering or other infringement. Although
we believe that our products, solutions and services 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 products or technology, obtain a
license or cease selling or using the products that contain the infringing elements. 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 products or
technology could have a material adverse impact on our results of operations.
System errors or failures of our products to conform to specifications could cause unforeseen liabilities or injury,
harm our reputation and have a material adverse impact on our results of operations.
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. If our software or systems lead to faulty clinical decisions or injury to patients, we could be
subject to claims or litigation by our clients, clinicians or patients. In addition, such failures could damage our
reputation and could negatively affect future sales.
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.
Various risks could interrupt customers’ access to their data residing in our service center, exposing us to
significant costs.
We provide remote hosting services that involve operating both our software and the software of third-party
vendors for our customers. The ability to access the systems and the data that we host and support on demand is
critical to our customers. Our operations and facilities are vulnerable to interruption and/or damage from a number
of sources, many of which are beyond our control, including, without limitation: (1) power loss and
telecommunications failures; (2) fire, flood, hurricane and other natural disasters; (3) software and hardware errors,
failures or crashes; and (4) cyber attacks, computer viruses, hacking and other similar disruptive problems. We
attempt to mitigate these risks through various means including disaster recovery plans, separate test systems and
change controls, information security procedures, and continued development and enhancement of our cyber
security, but our precautions may not protect against all risks. If customers’ access is interrupted because of
problems in the operation of our facilities, we could be exposed to significant claims, particularly if the access
interruption is associated with problems in the timely delivery of medical care. If customers’ access is interrupted
from failure or breach of our operational or information security systems, or those of our third party service
providers, we could suffer reputational harm or be exposed to liabilities arising from the unauthorized and improper
use or disclosure of confidential or proprietary information. We must maintain disaster recovery and business
continuity plans that rely upon third-party providers of related services and if those vendors fail us at a time that our
center is not operating correctly, we could incur a loss of revenue and liability for failure to fulfill our contractual
service commitments. Any significant instances of system downtime could negatively affect our reputation and
ability to sell our remote hosting services.