Avid 2014 Annual Report Download - page 22

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agreements with certain customers covering potential claims by third parties of intellectual property infringement. These
agreements generally provide that we will indemnify customers for losses incurred in connection with an infringement claim
brought by a third party with respect to our products, and we have received claims for such indemnification. The results of any
intellectual property litigation to which we are, or may become, a party, or for which we are required to provide indemnification,
may require us to:
• cease selling or using products or services that incorporate the challenged intellectual property;
• make substantial payments for legal fees, settlement payments or other costs or damages;
• obtain a license, which may not be available on reasonable terms, to sell or use the relevant technology, which such
license could require royalties that would significantly increase our cost of goods sold; or
• redesign products or services to avoid infringement, which such redesign could involve significant costs and result
in delayed and/or reduced sales of the affected products.
If we are unable to sell our professional products through retail sales channels, our operating results could be adversely
affected.
Following the divestiture of certain of our consumer product lines in July 2012, we continue to have a presence in retail because
our professional-level products are offered through specialty retail stores. Our ability to continue to sell our professional products
through certain retail sales channels may be impaired because we will sell fewer types of products and fewer units through those
channels, impacting retailers’ willingness to carry our professional-level products.
Unanticipated changes in our tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities
could affect our profitability.
We are subject to income and other taxes in the United States and numerous foreign jurisdictions. Our tax liabilities are affected
by the amounts we charge for inventory, services, licenses and other items in intercompany transactions. We are also subject to
ongoing tax audits in various jurisdictions. Tax authorities may disagree with our intercompany charges, cross-jurisdictional
transfer pricing or other matters and assess additional taxes. We regularly assess the likely outcomes of these audits in order to
determine the appropriateness of our tax provision. However, there can be no assurance that we will accurately predict the
outcomes of these audits, and the amounts ultimately paid upon the resolution of an audit could be materially different from the
amounts previously included in our income tax expense and therefore could have a material impact on our tax provision, net
income and cash flows. In addition, our tax provision in the future could be adversely affected by changes to our operating
structure, changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax
assets and liabilities, changes in tax laws and the discovery of new information in the course of our tax return preparation process.
We may be the subject of litigation, which, if adversely determined, could harm our business and operating results.
We may be subject to claims arising in the normal course of business. The costs of defending any litigation, whether in cash
expenses or in management time, could harm our business and materially and adversely affect our operating results and cash
flows. An unfavorable outcome on any litigation matter could require that we pay substantial damages, or, in connection with any
intellectual property infringement claims, could require that we pay ongoing royalty payments or prohibit us from selling certain
of our products. In addition, we may decide to settle any litigation, which could cause us to incur significant settlement costs. A
settlement or an unfavorable outcome on any litigation matter could have a material and adverse effect on our business, operating
results, financial condition and cash flows.
A natural disaster or catastrophic event may significantly limit our ability to conduct business as normal and harm our
business.
Our operations and the operations of our customers are vulnerable to interruptions by natural disasters or catastrophic events. For
example, we operate a complex, geographically dispersed business, which includes significant personnel, customers and facilities
presence in California near major earthquake fault lines. We may not be able to protect our company from such catastrophic
events and we are predominantly uninsured for business continuity losses and disruptions caused by catastrophic events.
Disruption or failure of our or our customers’ networks or systems, or injury or damage to either parties’ personnel or physical
infrastructure, caused by a natural disaster, public health crisis, terrorism, cyber attack, act of war or other catastrophic event may
significantly limit our or our customers’ ability to conduct business as normal, including our ability to communicate and transact
with customers, suppliers, distributors and resellers, which may negatively affect our revenues and operating results.