Computer Associates 2012 Annual Report Download - page 26

•Remediation efforts that may be required;
•Increased service and warranty costs;
•Legal actions by customers or government authorities against us that could, whether or not successful, be costly, distracting and
time-consuming;
•Increased insurance costs; and
•Failure to successfully complete service engagements for product installations and implementations.
Consequently, the discovery of errors in our products after delivery could materially adversely affect our business, financial
condition, operating results and cash flow.
Failure to protect our intellectual property rights and source code would weaken our competitive position.
Our future success is highly dependent upon our proprietary technology, including our software and our source code for that
software. Failure to protect such technology could lead to the loss of valuable assets and our competitive advantage. We protect our
proprietary information through the use of patents, copyrights, trademarks, trade secret laws, confidentiality procedures and
contractual provisions. Notwithstanding our efforts to protect our proprietary rights, policing unauthorized use or copying of our
proprietary information is difficult. Unauthorized use or copying occurs from time to time and litigation to enforce intellectual
property rights could result in significant costs and diversion of resources. Moreover, the laws of some foreign jurisdictions do not
afford the same degree of protection to our proprietary rights as do the laws of the United States. For example, for some of our
products, we rely on “shrink-wrap” or “click-on” licenses, which may be unenforceable in whole or in part in some jurisdictions in
which we operate. In addition, patents we have obtained may be circumvented, challenged, invalidated or designed around by other
companies. If we do not adequately protect our intellectual property for these or other reasons, our business, financial condition,
operating results and cash flow could be materially adversely affected. Refer to Part I , Item 1, “Business — (c) Narrative Description
of the Business — Intellectual Property,” for additional information.
Our sales to government clients subject us to risks, including early termination, renegotiation, audits,
investigations, sanctions and penalties.
Approximately 9% of our total revenue backlog at March 31, 2012 is associated with multi-year contracts signed with the
U.S. federal government and other U.S. state and local government agencies. These contracts are generally subject to annual fiscal
funding approval, may be renegotiated or terminated at the discretion of the government, or all of these. Termination, renegotiation or
funding approval for a contract could adversely affect our sales, revenue and reputation. Additionally, our government contracts are
generally subject to audits and investigations, which could result in various civil and criminal penalties and administrative sanctions,
including termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of payments, fines and
suspensions or debarment from doing business with the government, which could materially adversely affect our business, financial
condition, operating results and cash flow.
Certain software that we use in our products is licensed from third parties and, for that reason, may not be
available to us in the future, which has the potential to delay product development and production or cause us to
incur additional expense, which could materially adversely affect our business, financial condition, operating
results and cash flow.
Some of our solutions contain software licensed from third parties. Some of these licenses may not be available to us in the future on
terms that are acceptable to us or allow our products to remain competitive. The loss of these licenses or the inability to maintain any
of them on commercially acceptable terms could delay development of future products or the enhancement of existing products. We
may also choose to pay a premium price for such a license in certain circumstances where continuity of the licensed product would
outweigh the premium cost of the license. The unavailability of these licenses or the necessity of agreeing to commercially
unreasonable terms for such licenses could materially adversely affect our business, financial condition, operating results and cash
flow.
Certain software we use is from open source code sources, which, under certain circumstances, may lead to
unintended consequences and, therefore, could materially adversely affect our business, financial condition,
operating results and cash flow.
Some of our products contain software from open source code sources. The use of such open source code may subject us to certain
conditions, including the obligation to offer our products that use open source code for no cost. We monitor our use of such open
source code to avoid subjecting our products to conditions we do not intend. However, the use of such open source code may
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