Autodesk 2003 Annual Report Download - page 41

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. Litigation often becomes more likely in times of
economic downturn. 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.
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 and independent developers. Our ability to attract and retain key personnel is dependent on a number
of factors, including our continued ability to grant stock incentive awards. Changes in the accounting rules for
stock options, which are granted to most of our employees and which have been a significant factor in attracting
and retaining key technical and management experts, could have a material adverse effect on our business. The
loss of key personnel or inability to recruit new employees or independent developers would negatively impact
our business. In addition, we may experience increased compensation costs to attract and retain skilled personnel.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Foreign currency exchange risk
Our earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates.
Our risk management strategy utilizes foreign currency forward and option contracts to manage our foreign
currency exposures that exist as part of our ongoing business operations. Contracts are primarily denominated in
Euro, Swiss francs, Canadian dollars, British pounds and Japanese yen. We do not enter into any foreign
exchange derivative instruments for trading or speculative purposes.
A sensitivity analysis was performed on our hedging portfolio as of January 31, 2003. This analysis indicated
that a hypothetical 10 percent appreciation of the U.S. dollar from its value at January 31, 2003 would increase the
fair value of our forward exchange/option contracts by $6.6 million. Conversely, a hypothetical 10 percent
depreciation of the dollar from its value at January 31, 2003 would decrease the fair value of our forward exchange/
option contracts by $4.4 million. We do not anticipate any material adverse impact to our consolidated financial
position, results of operations or cash flows as a result of these foreign currency forward and option contracts.
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