iRobot 2011 Annual Report Download - page 66

Form 10-K
defects, errors or performance problems when first introduced, when new versions or enhancements are released,
or even after these products have been used by our customers for a period of time. These problems could result in
expensive and time-consuming design modifications or warranty charges, delays in the introduction of new
products or enhancements, significant increases in our service and maintenance costs, exposure to liability for
damages, mandatory or voluntary recall or product upgrades, damaged customer relationships and harm to our
reputation, any of which could materially harm our results of operations and ability to achieve market
acceptance. Our quality control procedures relating to the raw materials and components that it receives from
third-party suppliers as well as our quality control procedures relating to its products after those products are
designed, manufactured and packaged may not be sufficient. In addition, increased development and warranty
costs, including the costs of any mandatory or voluntary recall, could be substantial and could reduce our
operating margins. Moreover, because military robots are used in dangerous situations, the failure or malfunction
of any of these robots, including our own, could significantly damage our reputation and support for robot
solutions in general. The existence of any defects, errors, or failures in our products could also lead to product
liability claims or lawsuits against us. A successful product liability claim could result in substantial cost,
diminish our brand and divert management’s attention and resources, which could have a negative impact on our
business, financial condition and results of operations.
If we are unable to attract and retain additional skilled personnel, we may be unable to grow our business.
To execute our growth plan, we must attract and retain additional, highly-qualified personnel. Competition
for hiring these employees is intense, especially with regard to engineers with high levels of experience in
designing, developing and integrating robots. Many of the companies with which we compete for hiring
experienced employees have greater resources than we have. If we fail to attract new technical personnel or fail
to retain and motivate our current employees, our business and future growth prospects could be severely
harmed.
We may be sued by third parties for alleged infringement of their proprietary rights, which could be costly,
time-consuming and limit our ability to use certain technologies in the future.
If the size of our markets increases, we would be more likely to be subject to claims that our technologies
infringe upon the intellectual property or other proprietary rights of third parties. In addition, the vendors from
which we license technology used in our products could become subject to similar infringement claims. Our
vendors, or we, may not be able to withstand third-party infringement claims. Any claims, with or without merit,
could be time- consuming and expensive, and could divert our management’s attention away from the execution
of our business plan. Moreover, any settlement or adverse judgment resulting from the claim could require us to
pay substantial amounts or 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. There can be no assurance that we would be able to
obtain a license from the third party asserting the claim on commercially reasonable terms, if at all, that we
would be able to develop alternative technology on a timely basis, if at all, or that we would be able to obtain a
license to use a suitable alternative technology to permit us to continue offering, and our customers to continue
using, our affected product. In addition, we may be required to indemnify our retail and distribution partners for
third-party intellectual property infringement claims, which would increase the cost to us of an adverse ruling in
such a claim. An adverse determination could also prevent us from offering our products to others. Infringement
claims asserted against us or our vendors may have a material adverse effect on our business, results of
operations or financial condition.
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
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