AMD 2012 Annual Report Download - page 40

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 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 channels
compete with these heavily discounted gray market products, which adversely affects demand for our products
and negatively impact our margins. In addition, our inability to control gray market activities could result in
customer satisfaction issues because any time products are purchased outside our authorized distribution
channels there is a risk that our customers are buying counterfeit or substandard products, including products that
may have been altered, mishandled or damaged, or are used products represented as new.
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 there under 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. In jurisdictions where foreign laws provide less intellectual property protection than afforded
in the United States and abroad, our technology or other intellectual property may be compromised, and our
business would be materially adversely affected.
We are party to litigation and may become a party to other 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 are a defendant or plaintiff in various legal actions. We also sell products to
consumers, which could increase our exposure to consumer actions such as product liability claims. On occasion,
we receive claims that individuals were allegedly exposed to substances used in our former semiconductor wafer
manufacturing facilities and that this alleged exposure caused harm. Litigation can involve complex factual and
legal questions, and its outcome is uncertain. Any claim that is successfully asserted against us may result in the
payment of damages that could be material to our business.
With respect to intellectual property litigation, from time to time, we have been notified, or third parties may
bring or have brought actions against us and/or against our customers, based on allegations that we are infringing
or contributing to the infringement of the intellectual property rights of others. If any such claims are asserted, we
may seek to obtain a license under the third parties’ 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 do not
obtain a license, these parties may file lawsuits against us or our customers seeking damages (potentially up to
and including treble damages) or an injunction against the sale of 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 which
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, could have a material adverse effect
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