AMD 2005 Annual Report Download - page 70

Table of Contents
Our inability to effectively control the sales of our products on the gray market could have a material adverse effect on us.
We market and sell our products directly to OEMs and through authorized third-party distributors. From time to time, our products are diverted from our
authorized distribution channels and are sold on the “gray market.” Gray market products entering the market result in shadow inventory that is not visible to us,
thus making it difficult to forecast demand accurately. Also, when gray market products enter the market, we and our distribution channel compete with heavily
discounted products, which adversely affects demand for our products. In addition, our inability to control gray marketing activities could result in customer
satisfaction issues, because any time products are purchased outside our authorized distribution channel, there is a risk that our customers are buying counterfeit
or substandard products, including products that may have been altered, mishandled or damaged, or used products represented as new. Our inability to control
sales of our products on the gray market could have a material adverse effect on us.
If we cannot adequately protect our technology or other intellectual property in the United States and abroad, through patents, copyrights, trade
secrets, trademarks and other measures, we may lose a competitive advantage and incur significant expenses.
We rely on a combination of protections provided by contracts, including confidentiality and nondisclosure agreements, copyrights, patents, trademarks
and common law rights, such as trade secrets, to protect our intellectual property. However, we cannot assure you that we will be able to adequately protect our
technology or other intellectual property from third party infringement or from misappropriation in the United States and abroad. Any patent licensed by us or
issued to us could be challenged, invalidated or circumvented or rights granted thereunder may not provide a competitive advantage to us. Furthermore, patent
applications that we file may not result in issuance of a patent or, if a patent is issued, the patent may not be issued in a form that is advantageous to us. Despite
our efforts to protect our intellectual property rights, others may independently develop similar products, duplicate our products or design around our patents and
other rights. In addition, it is difficult to monitor compliance with, and enforce, our intellectual property on a worldwide basis in a cost-effective manner. Foreign
laws may provide less intellectual property protection than afforded in the United States. If we cannot adequately protect our technology or other intellectual
property in the United States and abroad, we would be materially adversely affected.
We are party to intellectual property litigation and may become a party to other intellectual property claims or litigation that could cause us to incur
substantial costs or pay substantial damages or prohibit us from selling our products.
From time to time, we have been notified, or third parties may bring actions against us, based on allegations that we are infringing the intellectual property
rights of others. If any such claims are asserted against us, we may seek to obtain a license under the third party’s intellectual property rights. We cannot assure
you that we will be able to obtain all of the necessary licenses on satisfactory terms, if at all. In the event that we cannot obtain a license, these parties may file
lawsuits against us seeking damages (potentially including treble damages) or an injunction against the sale of our products that incorporate allegedly infringed
intellectual property or against the operation of our business as presently conducted, which could result in our having to stop the sale of some of our products or
to increase the costs of selling some of our products or could damage our reputation. The award of damages, including material royalty payments, or the entry of
an injunction against the manufacture and sale of some or all of our products, would have a material adverse effect on us. We could decide, in the alternative, to
redesign our products or to resort to litigation to challenge such claims. Such challenges could be extremely expensive and time-consuming and could have a
material adverse effect on us. We cannot assure you that litigation related to the intellectual property rights of us and others can always be avoided or
successfully concluded.
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Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006