LeapFrog 2008 Annual Report Download - page 27

• political and economic instability, military conflicts and civil unrest;
• greater difficulty in staffing and managing foreign operations;
• transportation delays and interruptions;
• greater difficulty enforcing intellectual property rights and weaker laws protecting such rights;
• complications in complying with laws in varying jurisdictions and changes in governmental policies;
• trade protection measures and import or export licensing requirements;
• currency conversion risks and currency fluctuations;
• public health problems, especially in locations where we manufacture or otherwise have operations,
• effectively monitoring compliance by foreign manufacturers with U.S. regulatory requirements for
product safety,
• natural disasters; and
• limitations, including taxes, on the repatriation of earnings.
Currency conversion risks and fluctuations have recently become more pronounced. Sales to our
international customers are transacted primarily in the country’s local currency. If, as in 2008, foreign currency
weakens compared to the U.S. dollar, our international segment sales results suffer. For 2008, our international
segment sales declined by 7% compared to 2007 and 4% of this decline was attributed to foreign currency
fluctuations
Any difficulties with our international operations could harm our future sales and operating results.
Our intellectual property rights may not prevent other companies from using our technologies or similar
technologies to develop competing products, which could weaken our competitive position and harm our
operating results.
Our success depends in large part on our proprietary technologies that are used in our learning platforms and
related software. We rely, and plan to continue to rely, on a combination of patents, copyrights, trademarks,
service trademarks, trade secrets, confidentiality provisions and licensing arrangements to establish and protect
our proprietary rights. The contractual arrangements and the other steps we have taken to protect our intellectual
property may not prevent misappropriation of our intellectual property or deter independent third-party
development of similar technologies. The steps we have taken may not prevent unauthorized use of our
intellectual property, particularly in foreign countries where we do not hold patents or trademarks or where the
laws may not protect our intellectual property as fully as in the United States. Some of our products and product
features have limited intellectual property protection, and, as a consequence, we may not have the legal right to
prevent others from reverse engineering or otherwise copying and using these features in competitive products.
In addition, monitoring the unauthorized use of our intellectual property is costly, and any dispute or other
litigation, regardless of outcome, may be costly and time-consuming and may divert our management and key
personnel from our business operations. However, if we fail to protect or to enforce our intellectual property
rights successfully, our rights could be diminished and our competitive position could suffer, which could harm
our operating results.
Third parties have claimed, and may claim in the future, that we are infringing their intellectual property
rights, which may cause us to incur significant litigation or licensing expenses or to stop selling some of our
products or using some of our trademarks.
In the course of our business, we periodically receive claims of infringement or otherwise become aware of
potentially relevant patents, copyrights, trademarks or other intellectual property rights held by other parties.
Responding to any infringement claim, regardless of its validity, may be costly and time-consuming and may
17