iRobot 2005 Annual Report Download - page 32

If we fail to protect, or incur significant costs in defending, our intellectual property and other
proprietary rights, our business and results of operations could be materially harmed.
Our success depends on our ability to protect our intellectual property and other proprietary rights. We
rely primarily on patents, trademarks, copyrights, trade secrets and unfair competition laws, as well as license
agreements and other contractual provisions, to protect our intellectual property and other proprietary rights.
Significant technology used in our products, however, is not the subject of any patent protection, and we may
be unable to obtain patent protection on such technology in the future. Moreover, existing U.S. legal standards
relating to the validity, enforceability and scope of protection of intellectual property rights offer only limited
protection, may not provide us with any competitive advantages, and may be challenged by third parties. In
addition, the laws of countries other than the United States in which we market our products may afford little
or no effective protection of our intellectual property. Accordingly, despite our efforts, we may be unable to
prevent third parties from infringing upon or misappropriating our intellectual property or otherwise gaining
access to our technology. Unauthorized third parties may try to copy or reverse engineer our products or
portions of our products or otherwise obtain and use our intellectual property. Some of our contracts with the
U.S. federal government allow the federal government to disclose technical data regarding the products
developed on behalf of the government under the contract without constraining the recipient on how it is used.
This ability of the government creates the potential that third parties may be able to use this data to compete
with us in the commercial sector. If we fail to protect our intellectual property and other proprietary rights, our
business, results of operations or financial condition could be materially harmed.
In addition, defending our intellectual property rights may entail significant expense. We believe that
certain products in the marketplace may infringe our existing intellectual property rights. We have, from time
to time, resorted to legal proceedings to protect our intellectual property and may continue to do so in the
future. We may be required to expend significant resources to monitor and protect our intellectual property
rights. Any of our intellectual property rights may be challenged by others or invalidated through administra-
tive processes or litigation. If we resort to legal proceedings to enforce our intellectual property rights or to
determine the validity and scope of the intellectual property or other proprietary rights of others, the
proceedings could result in significant expense to us and divert the attention and efforts of our management
and technical employees, even if we were to prevail.
Potential future acquisitions could be difficult to integrate, divert the attention of key personnel, disrupt
our business, dilute stockholder value and impair our financial results.
As part of our business strategy, we intend to consider acquisitions of companies, technologies and
products that we believe could accelerate our ability to compete in our core markets or allow us to enter new
markets. Acquisitions involve numerous risks, any of which could harm our business, including:
‚ difficulties in integrating the operations, technologies, products, existing contracts, accounting and
personnel of the target company and realizing the anticipated synergies of the combined businesses;
‚ difficulties in supporting and transitioning customers, if any, of the target company;
‚ diversion of financial and management resources from existing operations;
‚ the price we pay or other resources that we devote may exceed the value we realize, or the value we
could have realized if we had allocated the purchase price or other resources to another opportunity;
‚ risks of entering new markets in which we have limited or no experience;
‚ potential loss of key employees, customers and strategic alliances from either our current business or
the target company's business;
‚ Assumption of unanticipated problems or latent liabilities, such as problems with the quality of the
target company's products; and
‚ inability to generate sufficient revenue to offset acquisition costs.
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