McKesson 2014 Annual Report Download - page 24

McKESSON CORPORATION
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Proprietary protections may not be adequate and products may be found to infringe the rights of third parties.
We rely on a combination of trade secret, patent, copyright and trademark laws, nondisclosure and other contractual provisions
and technical measures to protect our proprietary rights in our products and solutions. There can be no assurance that these
protections will be adequate or that our competitors will not independently develop products or solutions that are equivalent or
superior to ours. In addition, despite protective measures, we may be subject to unauthorized use of our technology due to copying,
reverse-engineering or other infringement. Although we believe that our products, solutions and services do not infringe the
proprietary rights of third parties, from time to time third parties have asserted infringement claims against us and there can be no
assurance that third parties will not assert infringement claims against us in the future. If we were found to be infringing others’
rights, we may be required to pay substantial damage awards and forced to develop non-infringing products or technology, obtain
a license or cease selling or using the products that contain the infringing elements. Additionally, we may find it necessary to
initiate litigation to protect our trade secrets, to enforce our patent, copyright and trademark rights and to determine the scope and
validity of the proprietary rights of others. These types of litigation can be costly and time consuming. These litigation expenses,
damage payments or costs of developing replacement products or technology could have a material adverse impact on our results
of operations.
System errors or failures of our products to conform to specifications could cause unforeseen liabilities or injury, harm our
reputation and have a material adverse impact on our results of operations.
The software and technology services (“systems”) that we sell or operate are complex. As with complex systems offered by
others, our systems may contain errors, especially when first introduced. For example, our Technology Solutions segment’s
business systems are intended to provide information to healthcare professionals in the course of delivering patient care. Therefore,
users of our systems have a greater sensitivity to errors than the general market for software products. If our software or systems
lead to faulty clinical decisions or injury to patients, we could be subject to claims or litigation by our clients, clinicians or patients.
In addition, such failures could damage our reputation and could negatively affect future sales.
Failure of a customer’s system to perform in accordance with our documentation could constitute a breach of warranty and
could require us to incur additional expense in order to make the system comply with the documentation. If such failure is not
remedied in a timely manner, it could constitute a material breach under a contract, allowing the client to cancel the contract, obtain
refunds of amounts previously paid or assert claims for significant damages.
Various risks could interrupt customers’ access to their data residing in our service center, exposing us to significant costs.
We provide remote hosting services that involve operating both our software and the software of third-party vendors for our
customers. The ability to access the systems and the data that we host and support on demand is critical to our customers. Our
operations and facilities are vulnerable to interruption and/or damage from a number of sources, many of which are beyond our
control, including, without limitation: (1) power loss and telecommunications failures; (2) fire, flood, hurricane and other natural
disasters; (3) software and hardware errors, failures or crashes; and (4) cyber attacks, computer viruses, hacking and other similar
disruptive problems. We attempt to mitigate these risks through various means including disaster recovery plans, separate test
systems and change controls, information security procedures, and continued development and enhancement of our cyber security,
but our precautions may not protect against all risks. If customers’ access is interrupted because of problems in the operation of
our facilities, we could be exposed to significant claims, particularly if the access interruption is associated with problems in the
timely delivery of medical care. If customers’ access is interrupted from failure or breach of our operational or information security
systems, or those of our third party service providers, we could suffer reputational harm or be exposed to liabilities arising from
the unauthorized and improper use or disclosure of confidential or proprietary information. We must maintain disaster recovery
and business continuity plans that rely upon third-party providers of related services and if those vendors fail us at a time that our
center is not operating correctly, we could incur a loss of revenue and liability for failure to fulfill our contractual service
commitments. Any significant instances of system downtime could negatively affect our reputation and ability to sell our remote
hosting services.