Autodesk 2002 Annual Report Download - page 32

Product returns could exceed our estimates and harm our net revenues.
With the exception of contracts with some distributors, our sales contracts do not contain specific product-
return privileges. However, we permit our distributors and resellers to return product in certain instances,
generally when new product releases supercede older versions. We anticipate that product returns in future
periods will continue to be impacted by product update cycles, new product releases and software quality.
We establish reserves for stock balancing and product rotation. These reserves are based on estimated
channel inventory levels and the timing of new product introductions and other factors. While we maintain strict
measures to monitor these reserves, actual product returns may differ from our reserve estimates, and such
differences could harm our business.
If we are not able to adequately protect our proprietary rights, our business could be harmed.
We rely on a combination of patents, copyright and trademark laws, trade secrets, confidentiality procedures
and contractual provisions to protect our proprietary rights. Despite such efforts to protect our proprietary rights,
unauthorized parties from time to time have copied aspects of our software products or have obtained and used
information that we regard as proprietary. Policing unauthorized use of our software products is time-consuming
and costly. While we have recovered some revenues resulting from the unauthorized use of our software
products, we are unable to measure the extent to which piracy of our software products exists, and software
piracy can be expected to be a persistent problem. Furthermore, our means of protecting our proprietary rights
may not be adequate, and our competitors may independently develop similar technology.
We may face intellectual property infringement claims that could be costly to defend and result in our loss of
significant rights.
We expect that software product developers will be increasingly subject to infringement claims as the
number of products and competitors in our industry segments grows and as the functionality of products in
different industry segments overlaps. Infringement, invalidity claims, or misappropriation claims may be asserted
against us, and any such assertions could harm our business. Any such claims, whether with or without merit,
could be time-consuming to defend, result in costly litigation and diversion of resources, cause product shipment
delays, or require us to enter into royalty or licensing agreements. In addition, such royalty or license agreements,
if required, may not be available on acceptable terms, if at all, which would likely harm our business.
We rely on third party technologies and if we are unable to use or integrate these technologies, our product
and service development may be delayed.
We rely on certain software that we license from third parties, including software that is integrated with
internally developed software and used in our products to perform key functions. These third-party software
licenses may not continue to be available on commercially reasonable terms, and the software may not be
appropriately supported, maintained or enhanced by the licensors. The loss of licenses to, or inability to support,
maintain and enhance any such software could result in increased costs, or in delays or reductions in product
shipments until equivalent software could be developed, identified, licensed and integrated, which would likely
harm our business.
In addition, for certain of our on-line collaboration applications and services, we rely on third party
hardware and services. Financial difficulties or even failure of these third parties may impact our ability to
deliver such on-line collaboration applications and, as a result, may adversely impact our business.
The loss of key personnel or the inability to attract and retain additional personnel could harm our business.
Our continued growth and success depends significantly on the continued service of highly skilled
employees. Our ability to attract and retain employees is dependent on a number of factors, including our
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