iRobot 2012 Annual Report Download - page 66

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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 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.