Rayovac 2014 Annual Report Download - page 33

batteries by establishing maximum quantities of heavy metals in batteries and mandates waste management of
these batteries, including collection, recycling and disposal systems, with the costs imposed upon producers and
importers such as us. The costs associated with maintaining compliance or failing to comply with the EU
Directives may harm our business. For example:
• Although contracts with our suppliers address related compliance issues, we may be unable to procure
appropriate Restriction of the Use of Hazardous Substances in Electrical and Electronic Equipment
compliant material in sufficient quantity and quality and/or be able to incorporate it into our product
procurement processes without compromising quality and/or harming our cost structure.
• We may face excess and obsolete inventory risk related to non-compliant inventory that we may hold
for which there is reduced demand, and we may need to write down the carrying value of such
inventories.
• We may be unable to sell certain existing inventories of our batteries in Europe and other countries that
have adopted similar regulations.
Many of the developing countries in which we operate do not have significant governmental regulation relating
to environmental safety, occupational safety, employment practices or other business matters routinely regulated in
the U.S. and EU or may not rigorously enforce such regulation. As these countries and their economies develop, it is
possible that new regulations or increased enforcement of existing regulations may increase the expense of doing
business in these countries. In addition, social legislation in many countries in which we operate may result in
significantly higher expenses associated with labor costs, terminating employees or distributors and closing
manufacturing facilities. Increases in our costs as a result of increased regulation, legislation or enforcement could
materially and adversely affect our business, results of operations and financial condition.
We may not be able to adequately establish and protect our intellectual property rights, and the
infringement or loss of our intellectual property rights could harm our business.
To establish and protect our intellectual property rights, we rely upon a combination of national, foreign and
multi-national patent, trademark and trade secret laws, together with licenses, confidentiality agreements and
other contractual arrangements. The measures that we take to protect our intellectual property rights may prove
inadequate to prevent third parties from infringing or misappropriating our intellectual property. We may need to
resort to litigation to enforce or defend our intellectual property rights. If a competitor or collaborator files a
patent application claiming technology also claimed by us, or a trademark application claiming a trademark,
service mark or trade dress also used by us, in order to protect our rights, we may have to participate in expensive
and time consuming opposition or interference proceedings before the U.S. Patent and Trademark Office or a
similar foreign agency. Similarly, our intellectual property rights may be challenged by third parties or
invalidated through administrative process or litigation. The costs associated with protecting intellectual property
rights, including litigation costs, may be material. Furthermore, even if our intellectual property rights are not
directly challenged, disputes among third parties could lead to the weakening or invalidation of our intellectual
property rights, or our competitors may independently develop technologies that are substantially equivalent or
superior to our technology. Obtaining, protecting and defending intellectual property rights can be time
consuming and expensive, and may require us to incur substantial costs, including the diversion of the time and
resources of management and technical personnel.
Moreover, the laws of certain foreign countries in which we operate or may operate in the future do not
protect, and the governments of certain foreign countries do not enforce, intellectual property rights to the same
extent as do the laws and government of the U.S., which may negate our competitive or technological advantages
in such markets. Also, some of the technology underlying our products is the subject of nonexclusive licenses
from third parties. As a result, this technology could be made available to our competitors at any time. If we are
unable to establish and then adequately protect our intellectual property rights, our business, financial condition
and results of operations could be materially and adversely affected.
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