Garmin 2010 Annual Report Download - page 38

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Our intellectual property rights are important to our operations, and we could suffer loss if they infringe upon
othe’s rights or are infringed upon by others.
We rely on a combination of patents, copyrights, trademarks and trade secrets, confidentiality provisions
and licensing arrangements to establish and protect our proprietary rights. To this end, we hold rights to a number
of patents and registered trademarks and regularly file applications to attempt to protect our rights in new
technology and trademarks. However, there is no guarantee that our patent applications will become issued
patents, or that our trademark applications will become registered trademarks. Moreover, even if approved, our
patents or trademarks may thereafter be successfully challenged by others or otherwise become invalidated for a
variety of reasons. Thus, any patents or trademarks we currently have or may later acquire may not provide us a
significant competitive advantage.
Third parties may claim that we are infringing their intellectual property rights. Such claims could have a
material adverse effect on our business and financial condition. From time to time we receive letters alleging
infringement of patents, trademarks or other intellectual property rights. Litigation concerning patents or other
intellectual property is costly and time consuming. We may seek licenses from such parties, but they could refuse
to grant us a license or demand commercially unreasonable terms. We might not have sufficient resources to pay
for the licenses. Such infringement claims could also cause us to incur substantial liabilities and to suspend or
permanently cease the use of critical technologies or processes or the production or sale of major products.
We may become subject to significant product liability costs.
If our aviation products malfunction or contain errors or defects, airplane collisions or crashes could occur
resulting in property damage, personal injury or death. Malfunctions or errors or defects in our marine
navigational products could cause boats to run aground or cause other wreckage, personal injury or death. If our
automotive or marine products contain defects or errors in the mapping supplied by third-party map providers or
if our users do not heed our warnings about the proper use of these products, collisions or accidents could occur
resulting in property damage, personal injury or death. If any of these events occurs, we could be subject to
significant liability for personal injury and property damage and under certain circumstances could be subject to a
judgment for punitive damages. We maintain insurance against accident-related risks involving our products.
However, there can be no assurance that such insurance would be sufficient to cover the cost of damages to
others or that such insurance will continue to be available at commercially reasonable rates. In addition, insurance
coverage generally will not cover awards of punitive damages and may not cover the cost of associated legal fees
and defense costs, which could result in lower margins. If we are unable to maintain sufficient insurance to cover
product liability costs or if our insurance coverage does not cover the award, this could have a materially adverse
impact on our business, financial condition and results of operations.
We depend on our suppliers, some of which are the sole source for specific components, and our production
would be seriously harmed if these suppliers are not able to meet our demand and alternative sources are not
available, or if the costs of components rise.
We are dependent on third party suppliers for various components used in our current products. Some of
the components that we procure from third party suppliers include semiconductors and electroluminescent
panels, liquid crystal displays, memory chips, batteries and microprocessors. The cost, quality and availability of
components are essential to the successful production and sale of our products. Some components we use are
from sole source suppliers. Certain application-specific integrated circuits incorporating our proprietary designs are
manufactured for us by sole source suppliers. Alternative sources may not be currently available for these sole
source components.
In the past we have experienced shortages of liquid crystal displays and other components. In addition, if
there are shortages in supply of components, the costs of such components may rise. If suppliers are unable to
meet our demand for components on a timely basis and if we are unable to obtain an alternative source or if the