Northrop Grumman 2009 Annual Report Download - page 27

Environmental laws and regulations can impose substantial fines and criminal sanctions for violations, and
may require the installation of costly pollution control equipment or operational changes to limit pollution
emissions or discharges and/or decrease the likelihood of accidental hazardous substance releases. In addition,
if we were found to be in violation of the Federal Clean Air Act or the Clean Water Act, the facility or
facilities involved in the violation could be placed by the EPA on the “Excluded Parties List” maintained by
the General Services Administration. The listing would continue until the EPA concluded that the cause of
the violation had been cured. Listed facilities cannot be used in performing any U.S. Government contract
while they are listed by the EPA. We also incur, and expect to continue to incur, costs to comply with
current federal and state environmental laws and regulations related to the cleanup of pollutants previously
released into the environment.
The adoption of new laws and regulations, stricter enforcement of existing laws and regulations, imposition
of new cleanup requirements, discovery of previously unknown or more extensive contamination, litigation
involving environmental impacts, our ability to recover such costs under previously priced contracts or
financial insolvency of other responsible parties could cause us to incur costs in the future that would have a
material adverse effect on our financial condition or results of operations.
쐍We are subject to various claims and litigation that could ultimately be resolved against us requiring material
future cash payments and/or future material charges against our operating income and materially impairing our
financial position.
The size and complexity of our business make it highly susceptible to claims and litigation. We are subject to
various existing environmental claims, income tax matters and other litigation, which, if not resolved within
established reserves, could have a material adverse effect on our consolidated financial position, results of
operations or cash flows. See Legal Proceedings in Part I, Item 3, Critical Accounting Policies, Estimates, and
Judgments in Part II, Item 7 and Note 14 to the consolidated financial statements in Part II, Item 8. Any
claims or litigation, even if fully indemnified or insured, could negatively affect our reputation among our
customers and the public, and make it more difficult for us to compete effectively or obtain adequate
insurance in the future.
쐍We may be unable to adequately protect our intellectual property rights, which could affect our ability to
compete.
We own many U.S. and foreign patents and patent applications, and we have rights in numerous trademarks
and copyrights. The U.S. Government has licenses under certain of our patents and certain other intellectual
property that are developed in performance of government contracts, and it may use or authorize others to
use such patents and intellectual property for government purposes. Our patents and other intellectual
property are subject to challenge, invalidation, misappropriation or circumvention by third parties.
We also rely significantly upon proprietary technology, information, processes and know-how that are not
subject to patent protection. We seek to protect this information through trade secret or confidentiality
agreements with our employees, consultants, subcontractors, or other parties, as well as through other
security measures. These agreements and security measures may not provide meaningful protection for our
unpatented proprietary information. In the event of an infringement of our intellectual property rights, a
breach of a confidentiality agreement or divulgence of proprietary information, we may not have adequate
legal remedies to maintain our intellectual property. Litigation to determine the scope of intellectual property
rights, even if ultimately successful, could be costly and could divert management’s attention away from other
aspects of our business. In addition, our trade secrets may otherwise become known or be independently
developed by competitors.
In some instances, we have augmented our technology base by licensing the proprietary intellectual property
of others. In the future, we may not be able to obtain necessary licenses on commercially reasonable terms.
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NORTHROP GRUMMAN CORPORATION
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