Mattel 2015 Annual Report Download - page 18

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to time, third parties have challenged, and may in the future try to challenge, Mattel's ownership of its intellectual property in
the US and around the world. In addition, Mattel's business is subject to the risk of third parties counterfeiting its products or
infringing on its intellectual property rights. The steps Mattel has taken may not prevent unauthorized use of its intellectual
property, particularly in foreign countries where the laws may not protect its intellectual property as fully as in the US. Mattel
may need to resort to litigation to protect its intellectual property rights, which could result in substantial costs and diversion of
resources. If Mattel fails to protect its proprietary intellectual property and information, including with respect to any successful
challenge to Mattel’s ownership of its intellectual property or material infringements of its intellectual property, this failure
could have a significant adverse effect on Mattel’s business, financial condition, and results of operations.
Mattel has acquired certain intellectual properties from third parties. Declines in the profitability of these acquired brands
may impact Mattel’s ability to recover the carrying value of the related assets and could result in an impairment charge.
Reduction in net earnings caused by impairment charges could harm Mattel’s financial results.
Unfavorable resolution of or adverse developments in legal proceedings, other investigations, or regulatory matters
could have a significant adverse effect on Mattel’s financial condition.
Mattel periodically receives claims of infringement of intellectual property rights held by other parties. Responding to
any infringement claim, regardless of its validity, may be costly and time-consuming and may divert management and key
personnel from business operations. If Mattel, its distributors, its licensors or its manufacturers are found to be infringing on the
intellectual property rights of any third party, they may be required to obtain a license to use those rights, which may not be
obtainable on reasonable terms, if at all.
Mattel is, from time to time, involved in litigation or other disputes, investigations, and regulatory matters. An
unfavorable resolution of these matters could have a significant adverse effect on Mattel’s financial condition and its
operations. Regardless of their outcome, these matters may result in substantial costs and expenses, significantly divert the
attention of management, or interrupt Mattel’s normal business operations. There can be no assurance that Mattel will be able to
prevail in, or achieve a favorable settlement of, any of these matters.
Mattel is subject to various laws and government policies or regulations in numerous jurisdictions, violation of which
could subject it to sanctions. In addition, changes in such laws or policies or regulations may lead to increased costs,
changes in Mattel’s effective tax rate, or the interruption of normal business operations that would negatively impact
Mattel’s financial condition and results of operations.
Mattel operates in a highly regulated environment in the US and international markets. US federal, state, and local
governmental entities, and foreign governments regulate many aspects of Mattel’s business, including its products and the
importation and exportation of its products. These policies or regulations may include accounting standards, taxation
requirements (including changes in applicable income tax rates, new tax laws and revised tax law interpretations), product
safety and other safety standards, trade restrictions, duties and tariffs, and regulations regarding currency and financial matters,
anticorruption standards (such as the US Foreign Corrupt Practices Act), environmental matters, advertising directed toward
children, product content, and privacy and data protection, as well as other administrative and regulatory restrictions. While
Mattel takes all the steps it believes are necessary to comply with these laws and policies or regulations, there can be no
assurance that Mattel will be in compliance in the future. Compliance with these various laws, regulations and policies imposes
significant costs on Mattel’s business, and failure to comply could result in monetary liabilities and other penalties, and could
lead to significant negative media attention and consumer dissatisfaction, which could have a significant adverse effect on
Mattel’s business, financial condition and results of operations.
In addition, changes in laws or policies or regulations may lead to increased costs, changes in Mattel’s effective tax rate,
or the interruption of normal business operations, any of which could negatively impact its financial condition and results of
operations.
Issues with products may lead to product liability, personal injury or property damage claims, recalls, withdrawals,
replacements of products, or regulatory actions by governmental authorities that could divert resources, affect business
operations, decrease sales, increase costs, and put Mattel at a competitive disadvantage, any of which could have a
significant adverse effect on Mattel’s financial condition.
Mattel has experienced, and may in the future experience, issues with products that may lead to product liability, personal
injury or property damage claims, recalls, withdrawals, replacements of products, or regulatory actions by governmental
authorities. Any of these activities could result in increased governmental scrutiny, harm to Mattel’s reputation, reduced
demand by consumers for its products, decreased willingness by retailer customers to purchase or provide marketing support
for those products, adverse impacts on Mattel’s ability to enter into licensing agreements for products on competitive terms,
absence or increased cost of insurance, or additional safety and testing requirements. Such results could divert development and