iRobot 2005 Annual Report Download - page 19

or invalidity, misappropriation, or other claims. Any such litigation could result in substantial costs and
diversion of our resources. Moreover, any settlement of or adverse judgment resulting from such litigation
could require us to obtain a license to continue to use the technology that is the subject of the claim, or
otherwise restrict or prohibit our use of the technology. Any required licenses may not be available to us on
acceptable terms, if at all. If we attempt to design around the technology at issue or to find another provider of
suitable alternative technology to permit us to continue offering applicable software or product solutions, our
continued supply of software or product solutions could be disrupted or our introduction of new or enhanced
software or products could be significantly delayed.
Regulations
We are subject to various government regulations, including various U.S. federal government regulations
as a contractor and subcontractor to the U.S. federal government. Among the most significant U.S federal
government regulations affecting our business are:
‚ the Federal Acquisition Regulations and supplemental agency regulations, which comprehensively
regulate the formation and administration of, and performance under government contracts;
‚ the Truth in Negotiations Act, which requires certification and disclosure of all cost and pricing data in
connection with contract negotiations;
‚ the Cost Accounting Standards, which impose accounting requirements that govern our right to
reimbursement under cost-based government contracts;
‚ the Foreign Corrupt Practices Act, which prohibits U.S. companies from providing anything of value to
a foreign official to help obtain, retain or direct business, or obtain any unfair advantages;
‚ the False Claims Act and the False Statements Act, which, respectively, impose penalties for payments
made on the basis of false facts provided to the government, and impose penalties on the basis of false
statements, even if they do not result in a payment; and
‚ laws, regulations and executive orders restricting the use and dissemination of information classified for
national security purposes and the exportation of certain products and technical data.
We also need special security clearances to continue working on and advancing certain of our projects
with the U.S. federal government. Classified programs generally will require that we comply with various
Executive Orders, federal laws and regulations and customer security requirements that may include
restrictions on how we develop, store, protect and share information, and may require our employees to obtain
government clearances.
The nature of the work we do for the federal government may also limit the parties who may invest in or
acquire us. Export laws may keep us from providing potential foreign acquirers with a review of the technical
data they would be acquiring. In addition, there are special requirements for foreign parties who wish to buy or
acquire control or influence over companies that control technology or produce goods in the security interests
of the United States. There may need to be a review under the Exon-Florio provisions of the Defense
Production Act. Finally, the government may require a prospective foreign owner to establish intermediaries to
actually run that part of the company that does classified work, and establishing a subsidiary and its separate
operation may make such an acquisition less appealing to such potential acquirers.
In addition, the export from the United States of many of our products may require the issuance of a
license by the U.S. Department of Commerce under the Export Administration Act, as amended, and its
implementing Regulations as kept in force by the International Emergency Economic Powers Act of 1977, as
amended. Some of our products may require the issuance of a license by the U.S. Department of State under
the Arms Export Control Act and its implementing Regulations, which licenses are generally harder to obtain
and take longer to obtain than do Export Administration Act licenses.
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