3Ware 2003 Annual Report Download - page 45

We have been named as a defendant in securities class action litigation that could result in substantial
costs including, but not limited to, attorney and expert fees, and divert management’s attention and
resources.
We are aware of several lawsuits in which we, our chief executive officer, chief financial officer and certain
of our other executive officers and directors, have been sued for alleged violations of federal securities laws
related to alleged misrepresentations regarding our financial prospects for the fourth quarter of fiscal 2001. We
believe that the claims being brought against us, our officers and directors are without merit, and we intend to
engage in a vigorous defense against such claims. If we are not successful in our defense against such claims, we
could be forced to make significant payments to our stockholders and their lawyers, and such payments could
have a material adverse effect on our business, financial condition and results of operations if not covered by our
insurance carriers. Even if such claims are not successful, the litigation could result in substantial costs including,
but not limited to, attorney and expert fees, and divert management’s attention and resources, which could have
an adverse effect on our business.
We may not be able to protect our intellectual property adequately.
We rely in part on patents to protect our intellectual property. We cannot assure you that our pending patent
applications or any future applications will be approved, or that any issued patents will adequately protect the
intellectual property in our products, provide us with competitive advantages or will not be challenged by third
parties, or that if challenged, will be found to be valid or enforceable. Furthermore, others may independently
develop similar products or processes, duplicate our products or processes or design around any patents that may
be issued to us.
To protect our intellectual property, we also rely on the combination of mask work protection under the
Federal Semiconductor Chip Protection Act of 1984, trademarks, copyrights, trade secret laws, employee and
third-party nondisclosure agreements, and licensing arrangements. Despite these efforts, we cannot be certain
that others will not independently develop substantially equivalent intellectual property or otherwise gain access
to our trade secrets or intellectual property, or disclose such intellectual property or trade secrets, or that we can
meaningfully protect our intellectual property. A failure by us to meaningfully protect our intellectual property
could have a material adverse effect on our business, financial condition and operating results.
We could be harmed by litigation involving patents, proprietary rights or other claims.
Litigation may be necessary to enforce our intellectual property rights, to determine the validity and scope
of the proprietary rights of others or to defend against claims of infringement or misappropriation. The
semiconductor industry is characterized by substantial litigation regarding patent and other intellectual property
rights. Such litigation could result in substantial costs and diversion of resources, including the attention of our
management and technical personnel and could have a material adverse effect on our business, financial
condition and results of operations. We may be accused of infringing on the intellectual property rights of third
parties. We have certain indemnification obligations to customers with respect to the infringement of third-party
intellectual property rights by our products. We cannot be certain that infringement claims by third parties or
claims for indemnification by customers or end users resulting from infringement claims will not be asserted in
the future or that such assertions, if proven to be true, will not harm our business.
Any litigation relating to the intellectual property rights of third parties, whether or not determined in our
favor or settled by us, would at a minimum be costly and could divert the efforts and attention of our
management and technical personnel. In the event of any adverse ruling in any such litigation, we could be
required to pay substantial damages, cease the manufacturing, use and sale of infringing products, discontinue the
use of certain processes or obtain a license under the intellectual property rights of the third party claiming
infringement. A license might not be available on reasonable terms, or at all.
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