3Ware 2004 Annual Report Download - page 61

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 generally enter into confidentiality agreements with our employees, consultants and strategic partners.
We also try to control access to and distribution of our technologies, documentation and other proprietary
information. Despite these efforts, parties may attempt to copy, disclose, obtain or use our products, services or
technology without our authorization. Also, former employees may seek employment with our business partners,
customers or competitors and we cannot assure you that the confidential nature of our proprietary information
will be maintained in the course of such future employment. Additionally, former employees or third parties
could attempt to penetrate our network to misappropriate our proprietary information or interrupt our business.
Because the techniques used by computer hackers to access or sabotage networks change frequently and
generally are not recognized until launched against a target, we may be unable to anticipate these techniques. As
aresult, our technologies and processes may be misappropriated, particularly in foreign countries where laws
may not protect our proprietary rights as fully as in the United States.
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 will not harm our business.
Any litigation relating to the intellectual property rights of third parties 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.
From time to time, we may be involved in litigation relating to other claims arising out of our operations in
the normal course of business. We cannot assure you that the ultimate outcome of any such matters will not have
amaterial, adverse effect on our business, financial condition or operating results.
Our stock price is volatile.
The market price of our common stock has fluctuated significantly. In the future, the market price of our
common stock could be subject to significant fluctuations due to general economic and market conditions and in
response to quarter-to-quarter variations in:
•our anticipated or actual operating results;
•announcements or introductions of new products by us or our competitors;
•anticipated or actual operating results of our customers, peers or competitors;
•technological innovations or setbacks by us or our competitors;
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