Medtronic 2014 Annual Report Download - page 32

We are substantially dependent on patent and other proprietary rights and failing to protect such rights or to be successful in
litigation related to our rights or the rights of others may result in our payment of significant monetary damages and/or
royalty payments, negatively impact our ability to sell current or future products, or prohibit us from enforcing our patent
and other proprietary rights against others.
We operate in an industry characterized by extensive patent litigation. Patent litigation against us can result in significant
damage awards and injunctions that could prevent our manufacture and sale of affected products or require us to pay significant
royalties in order to continue to manufacture or sell affected products. At any given time, we are generally involved as both a
plaintiff and a defendant in a number of patent infringement actions, the outcomes of which may not be known for prolonged
periods of time. While it is not possible to predict the outcome of patent litigation, we believe the results associated with any
such litigation could result in our payment of significant monetary damages and/or royalty payments, negatively impact our
ability to sell current or future products, or prohibit us from enforcing our patent and proprietary rights against others, which
would generally have a material adverse impact on our consolidated earnings, financial condition, and/or cash flows.
We rely on a combination of patents, trade secrets, and non-disclosure and non-competition agreements to protect our
proprietary intellectual property, and we will continue to do so. While we intend to defend against any threats to our intellectual
property, these patents, trade secrets, or other agreements may not adequately protect our intellectual property. Further, pending
patent applications owned by us may not result in patents being issued to us, patents issued to or licensed by us in the past or in
the future may be challenged or circumvented by competitors and such patents may be found invalid, unenforceable or
insufficiently broad to protect our technology or to provide us with any competitive advantage. Third parties could obtain
patents that may require us to negotiate licenses to conduct our business, and the required licenses may not be available on
reasonable terms or at all. We also rely on non-disclosure and non-competition agreements with certain employees, consultants,
and other parties to protect, in part, trade secrets and other proprietary rights. We cannot be certain that these agreements will
not be breached, that we will have adequate remedies for any breach, that others will not independently develop substantially
equivalent proprietary information, or that third parties will not otherwise gain access to our trade secrets or proprietary
knowledge.
In addition, the laws of certain countries in which we market some of our products do not protect our intellectual property rights
to the same extent as the laws of the U.S. If we are unable to protect our intellectual property in these countries, it could have a
material adverse effect on our business, financial condition or results of operations.
Product liability claims could adversely impact our financial condition and our earnings and impair our reputation.
Our business exposes us to potential product liability risks that are inherent in the design, manufacture, and marketing of
medical devices. In addition, many of the medical devices we manufacture and sell are designed to be implanted in the human
body for long periods of time or indefinitely. Component failures, manufacturing defects, design flaws, or inadequate disclosure
of product-related risks or product-related information with respect to our products could result in an unsafe condition or injury
to, or death of, a patient. The occurrence of such a problem could result in product liability claims or a recall of, or safety alert
relating to, one or more of our products which could ultimately result, in certain cases, in the removal from the body of such
products and claims regarding costs associated therewith. We have elected to self-insure with respect to product liability risks.
Product liability claims or product recalls in the future, regardless of their ultimate outcome, could have a material adverse
effect on our business and reputation and on our ability to attract and retain customers for our products.
Health care policy changes, including U.S. health care reform legislation signed in 2010, may have a material adverse effect
on us.
In response to perceived increases in health care costs in recent years, there have been and continue to be proposals by the
federal government, state governments, regulators, and third-party payers to control these costs and, more generally, to reform
the U.S. health care system. Certain of these proposals could limit the prices we are able to charge for our products or the
amounts of reimbursement available for our products and could limit the acceptance and availability of our products. The
adoption of some or all of these proposals could have a material adverse effect on our financial position and results of
operations.
In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act and the Health Care and
Education Affordability Reconciliation Act of 2010. Certain provisions of the law will not be effective for a number of years
and there are many programs and requirements for which the details have not yet been fully established or consequences not
fully understood, and it is unclear what the full impacts will be from the law. The legislation imposes significant new taxes on
24