NVIDIA 2011 Annual Report Download - page 23

Changes in United States tax legislation regarding our foreign earnings could materially impact our business.
Currently, a majority of our revenue is generated from customers located outside the United States, and a significant portion of our assets, including
employees, are located outside the United States. United States income taxes and foreign withholding taxes have not been provided on undistributed earnings
for certain non-United States subsidiaries, because such earnings are intended to be indefinitely reinvested in the operations of those subsidiaries. Throughout
the period of President Obama’s administration and as recently as on February 14, 2011 with the release of the administration’s fiscal year 2012 budget, the
White House has proposed various international tax legislation, some of which, if enacted into law would substantially reduce our ability to defer United
States taxes on such indefinitely reinvested non-United States earnings, eliminate certain tax deductions until foreign earnings are repatriated to the United
States and/or otherwise cause the total tax cost of U.S. multinational corporations to increase. If these or similar proposals are constituted into legislation in
the current or future year(s), they could have a negative impact on our financial position and results of operations.
Our operating results may be adversely affected if we are subject to unexpected tax liabilities.
We are subject to taxation by a number of taxing authorities both in the United States and throughout the world. Tax rates vary among the
jurisdictions in which we operate. Significant judgment is required in determining our provision for our income taxes as there are many transactions and
calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates are reasonable, any of the below could cause our
effective tax rate to be materially different than that which is reflected in historical income tax provisions and accruals:
• the jurisdictions in which profits are determined to be earned and taxed;
• adjustments to estimated taxes upon finalization of various tax returns;
• changes in available tax credits;
• changes in share-based compensation expense;
•changes in tax laws, the interpretation of tax laws either in the United States or abroad or the issuance of new interpretative accounting guidance
related to uncertain transactions and calculations where the tax treatment was previously uncertain; and
• the resolution of issues arising from tax audits with various tax authorities.
Should additional taxes be assessed as a result of any of the above, our operating results could be adversely affected. In addition, our future effective
tax rate could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in tax laws or changes in the
interpretation of tax laws.
Litigation to defend against alleged infringement of intellectual property rights or to enforce our intellectual property rights and the outcome of
such litigation could result in substantial costs to us.
We expect that as the number of issued hardware and software patents increases and as competition intensifies, the volume of intellectual property
infringement claims and lawsuits may increase. We may in the future become involved in lawsuits or other legal proceedings alleging patent infringement or
other intellectual property rights violations by us or by our customers that we have agreed to indemnify them for certain claims of infringement.
An unfavorable ruling in any such intellectual property related litigation could include significant damages, invalidation of a patent or family of
patents, indemnification of customers, payment of lost profits, or, when it has been sought, injunctive relief.
In addition, in the future, we may need to commence litigation or other legal proceedings in order to:
• assert claims of infringement of our intellectual property;
• enforce our patents;
• protect our trade secrets or know-how; or
• determine the enforceability, scope and validity of the propriety rights of others.
If we have to initiate litigation in order to protect our intellectual property, our operating expenses may increase which could negatively impact our
operating results. Our failure to effectively protect our intellectual property could harm our business.
If infringement claims are made against us or our products are found to infringe a third parties’ patent or intellectual property, we or one of our
indemnified customers may have to seek a license to the third parties’ patent or other intellectual property rights. However, we may not be able to obtain
licenses at all or on terms acceptable to us particularly from our competitors. If we or one of our indemnified customers is unable to obtain a license from a
third party for technology that we use or that is used in one of our products, we could be subject to substantial liabilities or have to suspend or discontinue the
manufacture and sale of one or more of our products. We may also have to make royalty or other payments, or cross license our technology. If these
arrangements are not concluded on commercially reasonable terms, our business could be negatively impacted. Furthermore, the indemnification of a
customer may increase our operating expenses which could negatively impact our operating results.
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