Sharp 2009 Annual Report Download - page 35

is recognized, Sharp may have to pay a large amount of
compensation, and may incur further damage by having to
cease using the technology in question. Also, as a result of
an M&A, a third party previously unlicensed to use Sharp’s
intellectual property may acquire such license, with the result
that Sharp’s intellectual property may lose its superiority.
Alternatively, an M&A with a third party could result in
Sharp’s business becoming subject to new restrictions to
which it had not previously been subject, the resolution of
which may require Sharp to pay additional compensation.
Furthermore, although compensation is given to employees
for innovations that they make in the course of their work
pursuant to a patent reward system governed by internal
regulations, an employee may consider such payment inad-
equate and initiate legal action. If any of the above problems
related to intellectual property were to occur, it could impact
Sharp’s business results and financial position.
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Sharp manufactures products in accordance with strict
quality control standards to ensure the utmost in quality.
In order to fulfill its responsibility as a manufacturer in
case product defects do arise, Sharp has taken out insur-
ance to cover compensations based on product liability.
Nonetheless, there is still a risk of a large-scale product
recall or litigation caused by unforeseen events, which
may adversely affect brand image or influence Sharp’s
business results and financial position.
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The business activities of Sharp are subject to various regula-
tions in countries where it operates, including business and
investment approval, export regulations, tariffs, accounting
standards and taxation. Sharp must also adhere to various
laws and regulations concerning trading, antitrust practices,
product liability, consumer protection, intellectual property
rights, product safety, the environment and recycling, and
internal control. Changes in such laws and regulations, and
additional expenses to comply with the amendments may
affect Sharp’s business results and financial position. Further,
in a case where an accident occurs related to one of Sharp’s
products, report of said incident, based on the Consumer
Product Safety Law and related regulations in Japan, and
disclosure of the accident information based on a system for
public announcements could diminish Sharp’s brand image.
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Sharp conducts business activities around the world, and as
such, is subject to risk associated with litigation and other
legal proceedings. Differences in legal and judicial system
according to region make it difficult to predict the result of
litigation or other legal proceedings currently involving Sharp
or of those which may arise in the future. Sharp is subject to
investigations conducted by the Directorate-General for
Competition of the European Commission, etc. with respect
to its TFT LCD business. In addition, civil lawsuits seeking
monetary damages resulting from alleged anticompetitive
behavior have been filed in North America against Sharp.
With respect to the investigation conducted by the United
States Department of Justice, Sharp agreed to pay a fine and
so on. Sharp also received a cease and desist order and a
surcharge payment order from the Japan Fair Trade Commis-
sion. It is difficult to predict the result of these proceedings
and litigation at this stage. An adverse result could affect
Sharp’s business results and financial position.
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Sharp retains personal data and other confidential informa-
tion concerning its customers, business partners and
employees. Extreme care is taken to protect this informa-
tion. A company-wide management system promotes
employee education, internal auditing, and other mea-
sures aimed at ensuring compliance with management
regulations. If information is leaked, however, it may
reduce confidence in Sharp or result in substantial costs
(associated with leakage prevention measures or indemni-
fication for damages, for instance), which may affect
Sharp’s business results and financial position.
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In addition to the aforementioned risks, Sharp’s business
results may be significantly affected by accidents and natu-
ral calamities such as earthquakes or typhoons, the spread
of a new strain of influenza or other infectious disease, or
major fluctuations in the stock and bond markets.
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