Nautilus 2015 Annual Report Download - page 15
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Please find page 15 of the 2015 Nautilus annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.System security risks, data protection breaches and cyber attacks could disrupt our operations.
We manage and store various proprietary information and sensitive or confidential data relating to our business, including sensitive and personally identifiable
information. Breaches of our security measures or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or
confidential data about us, or our customers, including the potential loss or disclosure of such information or data as a result of fraud, trickery or other forms of
deception, could expose us, our customers or the individuals affected to a risk of loss or misuse of this information, result in litigation and potential liability for us,
damage our brand and reputation or otherwise harm our business. In addition, the cost and operational consequences of implementing further data protection
measures could be significant.
Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential information or
that of third parties, create system disruptions or cause shutdowns. Computer programmers and hackers also may be able to develop and deploy viruses, worms and
other malicious software programs that attack or otherwise exploit any security vulnerabilities of our systems. In addition, sophisticated hardware and operating
system software and applications that we procure from third parties may contain defects in design or manufacture, including "bugs" and other problems that could
unexpectedly interfere with the operation of the system. The costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malicious
software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful and could result in
interruptions, delays, cessation of service and loss of existing or potential customers that may impede our sales, manufacturing, distribution or other critical
functions.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Following is a summary of each of our properties as of December 31, 2015 :
Company
Location
Primary Function(s)
Owned or
Leased
Nautilus
Washington
Corporate headquarters, customer call center, retail store and R&D facility
Leased
Octane
Minnesota
Design, sales, service and R&D facility
Leased
Nautilus
Ohio
Warehouse and distribution facility
Leased
Nautilus
Oregon
Warehouse and distribution facility
Leased
Nautilus
China
Quality assurance office
Leased
Octane
Netherlands
Sales and service office
Leased
Octane
United Kingdom
Sales office
Leased
The Nautilus properties are used by both our Direct and Retail segments, and the Octane properties are primarily used for our Retail segment. The properties
generally are well-maintained, adequate and suitable for their intended purposes, and we believe our existing properties will meet our operational needs for the
foreseeable future. If we require additional warehouse or office space in the future, we believe we will be able to obtain such space on commercially reasonable
terms.
Item 3. Legal Proceedings
Patent Infringement Case
In 2004, we were sued in the Southern District of New York by BioSig Instruments, Inc. for alleged patent infringement in connection with our incorporation of
heart rate monitors into certain cardio products. No significant activity in the litigation occurred until 2008. In 2012, the United States District Court granted
summary judgment to us on grounds that BioSig’s patents
were invalid as a matter of law. BioSig appealed the grant of summary judgment and, in April 2013, the United States Court of Appeals for the Federal Circuit
reversed the District Court’s decision on summary judgment and remanded the case to the District Court for further proceedings. On January 10, 2014, the U. S.
Supreme Court granted our petition for a writ of certiorari to address the legal standard applied by the Federal Circuit in determining whether the patents may be
valid under applicable law. The case was argued before the Supreme Court on April 28, 2014. By decision dated June 2, 2014, the Supreme Court unanimously
reversed the Federal Circuit, holding that its standard of when a patent may be “indefinite” was incorrect and remanding to the Federal Circuit for reconsideration
under the correct standard. The remand hearing in the Federal Circuit was held on October 29, 2014.
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