Lululemon 2011 Annual Report Download - page 18

Table of Contents
Our failure to comply with trade and other regulations could lead to investigations or actions by government regulators and negative
publicity.
The labeling, distribution, importation, marketing and sale of our products are subject to extensive regulation by various federal agencies,
including the Federal Trade Commission, Consumer Product Safety Commission and state attorneys general in the United States, the
Competition Bureau and Health Canada in Canada, as well as by various other federal, state, provincial, local and international regulatory
authorities in the countries in which our products are distributed or sold. If we fail to comply with any of these regulations, we could become
subject to enforcement actions or the imposition of significant penalties or claims, which could harm our results of operations or our ability to
conduct our business. In addition, the adoption of new regulations or changes in the interpretation of existing regulations may result in
significant compliance costs or discontinuation of product sales and could impair the marketing of our products, resulting in significant loss of
net sales.
Our fabrics and manufacturing technology are not patented and can be imitated by our competitors.
The intellectual property rights in the technology, fabrics and processes used to manufacture our products are owned or controlled by our
suppliers and are generally not unique to us. Our ability to obtain intellectual property protection for our products is therefore limited and we
currently own no patents or exclusive intellectual property rights in the technology, fabrics or processes underlying our products. As a result, our
current and future competitors are able to manufacture and sell products with performance characteristics, fabrics and styling similar to our
products. Because many of our competitors have significantly greater financial, distribution, marketing and other resources than we do, they may
be able to manufacture and sell products based on our fabrics and manufacturing technology at lower prices than we can. If our competitors do
sell similar products to ours at lower prices, our net revenue and profitability could suffer.
Our failure or inability to protect our intellectual property rights could diminish the value of our brand and weaken our competitive
position.
We currently rely on a combination of copyright, trademark, trade dress and unfair competition laws, as well as confidentiality procedures
and licensing arrangements, to establish and protect our intellectual property rights. We cannot assure you that the steps taken by us to protect
our intellectual property rights will be adequate to prevent infringement of such rights by others, including imitation of our products and
misappropriation of our brand. In addition, intellectual property protection may be unavailable or limited in some foreign countries where laws
or law enforcement practices may not protect our intellectual property rights as fully as in the United States or Canada, and it may be more
difficult for us to successfully challenge the use of our intellectual property rights by other parties in these countries. If we fail to protect and
maintain our intellectual property rights, the value of our brand could be diminished and our competitive position may suffer.
Our future success is substantially dependent on the continued service of our senior management.
Our future success is substantially dependent on the continued service of our senior management and other key employees. The loss of the
services of our senior management or other key employees could make it more difficult to successfully operate our business and achieve our
business goals.
We also may be unable to retain existing management, technical, sales and client support personnel that are critical to our success, which
could result in harm to our customer and employee relationships, loss of key information, expertise or know-how and unanticipated recruitment
and training costs.
We do not maintain a key person life insurance policy on Ms. Day or any of the other members of our senior management team. As a
result, we would have no way to cover the financial loss if we were to lose the services of members of our senior management team.
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