Toro 2009 Annual Report Download - page 22

In the absence of enforceable patent protection, we may be vulner- safety; and the generation, use, handling, labeling, collection, man-
able to competitors who attempt to copy our products or gain agement, storage, transportation, treatment, and disposal of haz-
access to our trade secrets and know-how. Others may initiate ardous substances, wastes, and other regulated materials.
litigation to challenge the validity of our patents, or allege that we Although we believe that we are in substantial compliance with
infringe their patents, or they may use their resources to design applicable laws, rules, and regulations, we are unable to predict
comparable products that do not infringe our patents. We may the ultimate impact of adopted or future laws, rules, and regula-
incur substantial costs if our competitors initiate litigation to chal- tions on our business, properties, or products. Any of these laws,
lenge the validity of our patents, or allege that we infringe their rules, or regulations may cause us to incur significant expenses to
patents, or if we initiate any proceedings to protect our proprietary achieve or maintain compliance, require us to modify our products,
rights. If the outcome of any such litigation is unfavorable to us, adversely affect the demand for some of our products, and ulti-
our business, operating results, and financial condition could be mately affect the way we conduct our operations. Failure to comply
adversely affected. We also cannot be certain that our products or with any of these laws, rules, or regulations could lead to fines and
technologies have not infringed or will not infringe the proprietary other penalties, including restrictions on the importation of our
rights of others. Any such infringement could cause third parties, products into, and the sale of our products in, one or more jurisdic-
including our competitors, to bring claims against us, resulting in tions until compliance is achieved.
significant costs, possible damages and substantial uncertainty. Because we own and lease real property, various environmental
We could also be forced to develop an alternative that could be laws also may impose liability on us for the costs of cleaning up
costly and time-consuming, or acquire a license, which we might and responding to hazardous substances that may have been
not be able to do on terms favorable to us, or at all. For example, released on our property, including releases unknown to us. These
we are currently a defendant in an action in which Textron Innova- environmental laws and regulations also could require us to pay for
tions, Inc. is alleging that we willfully infringe certain claims of three environmental remediation and response costs at third-party loca-
patents by selling our Groundsmaster姞 commercial mowers. Tex- tions where we disposed of or recycled hazardous substances. We
tron Innovations, Inc. seeks damages for past sales and an injunc- are currently involved in the evaluation and clean-up of a limited
tion against future infringement. This litigation is currently stayed number of properties we either currently or previously owned.
as our reexamination applications are pending in the USPTO. For Although we do not expect that these current matters will have a
additional information regarding this lawsuit, see Part I, Item 3 material adverse effect on our financial position or operating
‘‘Legal Proceedings’’ of this report. While we do not believe that results, our future costs of complying with the various environmen-
this litigation will have a material adverse effect on our financial tal requirements, as they now exist or may be altered in the future,
condition, an unfavorable resolution or outcome could be material could adversely affect our financial condition and operating results.
to our operating results. In addition, governmental restrictions placed on water usage as
In addition, we rely on trade secrets and proprietary know-how well as water availability may adversely affect demand for our irri-
that we seek to protect, in part, by confidentiality agreements with gation products. Changes in laws and regulations, including
our employees and consultants. These agreements may be changes in accounting standards, taxation changes, including tax
breached, and we may not have adequate remedies for any such rate changes, new tax laws, and revised tax law interpretations,
breach. Even if these confidentiality agreements are not breached, also may adversely affect our operating results.
our trade secrets may otherwise become known or be indepen-
Legislative enactments could impact the competitive
dently developed by competitors.
landscape within our markets and affect demand for our
Our business, properties, and products are subject to products.
governmental regulation with which compliance may Various legislative proposals, if enacted, could put us in a competi-
require us to incur expenses or modify our products or tively advantaged or disadvantaged position and affect customer
operations and non-compliance may expose us to demand for our products relative to the product offerings of our
penalties. Governmental regulation may also adversely competitors. For example, any fiscal-stimulus or other legislative
affect the demand for some of our products and our enactment that impacts the lawn and garden, outdoor power equip-
operating results. ment, or irrigation industries generally by promoting the purchase,
Our business, properties, and products are subject to numerous such as through customer rebate or other incentive programs, of
international, federal, state, and other governmental laws, rules, certain types of mowing or irrigation equipment or other products
and regulations relating to, among other things, climate change; that we sell, could impact us positively or negatively, depending on
emissions to air and discharges to water; product and associated whether we manufacture products that meet the specified legisla-
packaging; import and export compliance, including country of ori- tive criteria, including in areas such as fuel efficiency, alternative
gin certification requirements; worker and product user health and
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