iRobot 2011 Annual Report Download - page 67

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 administrative 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.
If we fail to enhance our brand, our ability to expand our customer base will be impaired and our operating
results may suffer.
We believe that developing and maintaining awareness of the iRobot brand is critical to achieving
widespread acceptance of our existing and future products and is an important element in attracting new
customers. Furthermore, we expect the importance of global brand recognition to increase as competition
develops. If customers do not perceive our products to be of high quality, our brand and reputation could be
harmed, which could adversely impact our financial results. In addition, brand promotion efforts may not yield
significant revenue or increased revenue sufficient to offset the additional expenses incurred in building our
brand.
We depend on the experience and expertise of our senior management team and key technical employees,
and the loss of any key employee may impair our ability to operate effectively.
Our success depends upon the continued services of our senior management team and key technical
employees, such as our project management personnel and senior engineers. Moreover, we often must comply
with provisions in government contracts that require employment of persons with specified levels of education
and work experience. Each of our executive officers, key technical personnel and other employees could
terminate his or her relationship with us at any time. The loss of any member of our senior management team
might significantly delay or prevent the achievement of our business objectives and could materially harm our
business and customer relationships. In addition, because of the highly technical nature of our robots, the loss of
any significant number of our existing engineering and project management personnel could have a material
adverse effect on our business and operating results.
We are subject to extensive U.S. federal government regulation, and our failure to comply with applicable
regulations could subject us to penalties that may restrict our ability to conduct our business.
As a contractor and subcontractor to the U.S. federal government, we are subject to and must comply with
various government regulations that impact our operating costs, profit margins and the internal organization and
operation of our business. Among the most significant 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;
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