Kodak 2011 Annual Report Download - page 14

In addition, third parties may claim that the Company’s customers, licensees or other parties indemnified by us are infringing upon their intellectual
property rights. Such claims may be made by competitors seeking to block or limit the Company’s access to digital markets. Additionally, in recent years,
individuals and groups have begun purchasing intellectual property assets for the sole purpose of making claims of infringement and attempting to extract
settlements from large companies like ours. Even if we believe that the claims are without merit, the claims can be time consuming and costly to defend
and distract management’s attention and resources. Claims of intellectual property infringement also might require us to redesign affected products, enter
into costly settlement or license agreements or pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing or
selling certain of the Company’s products. Even if we have an agreement to indemnify us against such costs, the indemnifying party may be unable to
uphold its contractual obligations. If we cannot or do not license the infringed technology at all, license the technology on reasonable terms or substitute
similar technology from another source the Company’s revenue and earnings could be adversely impacted. Finally, we use open source software in
connection with the Company’s products and services. Companies that incorporate open source software into their products have, from time to time, faced
claims challenging the ownership of open source software and/or compliance with open source license terms. As a result, we could be subject to suits by
parties claiming ownership of what we believe to be open source software or noncompliance with open source licensing terms. Some open source software
licenses require users who distribute open source software as part of their software to publicly disclose all or part of the source code to such software and/or
make available any derivative works of the open source code on unfavorable terms or at no cost. Any requirement to disclose the Company’s source code
or pay damages for breach of contract could be harmful to the Company’s business results of operations and financial condition.
The competitive pressures we face could harm the Company’s revenue, gross margins and market share.
The markets in which we do business are highly competitive with large, entrenched, and well financed industry participants. In certain markets where
Kodak is a relatively new entrant, we have not achieved the scale of distribution of the Company’s competitors. In addition, we encounter aggressive price
competition for all the Company’s products and services from numerous companies globally. Over the past several years, price competition in the market
for digital products, film products and services has been particularly intense as competitors have aggressively cut prices and lowered their profit margins for
these products. The Company’s results of operations and financial condition may be adversely affected by these and other Industry-wide pricing
pressures. If the Company’s products, services and pricing are not sufficiently competitive with current and future competitors, we could also lose market
share, adversely affecting the Company’s revenue and gross margins.
If the Company’s commercialization and manufacturing processes fail to prevent product reliability and quality issues, the Company’s product
launch plans may be delayed, the Company’s financial results may be adversely impacted, and the Company’s reputation may be harmed.
In developing, commercializing and manufacturing the Company’s products and services, we must adequately address reliability and other quality issues,
including defects in the Company’s engineering, design and manufacturing processes, as well as defects in third-party components included in the
Company’s products. Because the Company’s products are becoming increasingly sophisticated and complicated to develop and commercialize with rapid
advances in technologies, the occurrence of defects may increase, particularly with the introduction of new product lines. Unanticipated issues with product
performance may delay product launch plans which could result in additional expenses, lost revenue and earnings. Although we have established internal
procedures to minimize risks that may arise from product quality issues, there can be no assurance that we will be able to eliminate or mitigate occurrences
of these issues and associated liabilities. Product reliability and quality issues can impair the Company’s relationships with new or existing customers and
adversely affect the Company’s brand image, and the Company’s reputation as a producer of high quality products could suffer, which could adversely
affect the Company’s business as well as the Company’s financial results. Product quality issues can also result in recalls, warranty, or other service
obligations and litigation.
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