Plantronics 2009 Annual Report Download - page 30

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Our products are subject to various regulatory requirements, and changes in such regulatory requirements may adversely impact
our gross margins as we comply with such changes or reduce our ability to generate revenues if we are unable to comply.
Our products must meet the requirements set by regulatory authorities in the numerous jurisdictions in which we sell them. For
example, certain of our office and contact center products must meet certain standards to work with local phone systems. Certain of
our wireless office and mobile products must work within existing frequency ranges permitted in various jurisdictions. As regulations
and local laws change, we must modify our products to address those changes. Regulatory restrictions may increase the costs to
design, manufacture and sell our products, resulting in a decrease in our margins or a decrease in demand for our products if the costs
are passed along. Compliance with regulatory restrictions may impact the technical quality and capabilities of our products reducing
their marketability.
We have intellectual property rights that could be infringed by others, and we may infringe on the intellectual property rights of
others.
Our success depends in part on our ability to protect our copyrights, patents, trademarks, trade dress, trade secrets, and other
intellectual property, including our rights to certain domain names. We rely primarily on a combination of nondisclosure agreements
and other contractual provisions as well as patent, trademark, trade secret, and copyright laws to protect our proprietary rights.
Effective trademark, patent, copyright, and trade secret protection may not be available in every country in which our products and
media properties are distributed to customers. The process of seeking intellectual property protection can be lengthy and expensive.
Patents may not be issued in response to our applications, and any patents that may be issued may be invalidated, circumvented or
challenged by others. If we are required to enforce our intellectual property or other proprietary rights through litigation, the costs and
diversion of management's attention could be substantial. In addition, the rights granted under any intellectual property may not
provide us competitive advantages or be adequate to safeguard and maintain our proprietary rights. Moreover, the laws of certain
countries do not protect our proprietary rights to the same extent as do the laws of the U.S. If we do not enforce and protect our
intellectual property rights, it could materially adversely affect our business, financial condition and results of operations.
Patents, copyrights, trademarks and trade secrets are owned by individuals or entities who may make claims or commence litigation
based on allegations of infringement or other violations of intellectual property rights. As we have grown, the intellectual property
rights claims against us have increased. There has also been a general trend of increasing intellectual property assertion against
corporations that make and sell products. Our products and technologies may be subject to certain third-party claims and, regardless
of the merits of the claim, intellectual property claims are often time-consuming and expensive to litigate settle or otherwise resolve.
In addition, to the extent claims against us are successful, we may have to pay substantial monetary damages or discontinue the
manufacture and distribution of products that are found to be in violation of another party’s rights. We also may have to obtain, or
renew on less favorable terms, licenses to manufacture and distribute our products, which may significantly increase our operating
expenses. In addition, many of our agreements with our distributors and resellers require us to indemnify them for certain third-party
intellectual property infringement claims. Discharging our indemnity obligations may involve time-consuming and expensive
litigation, may result in substantial settlements or damages awards, may result in our products being enjoined, and may result in the
loss of a distribution channel or retail partner.
We are exposed to potential lawsuits alleging defects in our products and/or other claims related to the use of our products.
The use of our products exposes us to the risk of product liability and hearing loss claims. These claims have in the past been, and are
currently being, asserted against us. None of the previously resolved claims have materially affected our business, financial condition
or results of operations, nor do we believe that any of the pending claims will have such an effect. Although we maintain product
liability insurance, the coverage provided under our policies could be unavailable or insufficient to cover the full amount of any such
claim. Therefore, successful product liability or hearing loss claims brought against us could have a material adverse effect upon our
business, financial condition and results of operations.
Our mobile headsets are used with mobile telephones. There has been continuing public controversy over whether the radio frequency
emissions from mobile telephones are harmful to users of mobile phones. We believe that there is no conclusive proof of any health
hazard from the use of mobile telephones but research in this area is incomplete. We have tested our headsets through independent
laboratories and have found that use of our corded headsets reduces radio frequency emissions at the user's head to virtually zero. Our
Bluetooth and other wireless headsets emit significantly less powerful radio frequency emissions than mobile phones. However, if
research establishes a health hazard from the use of mobile telephones or public controversy grows even in the absence of conclusive
research findings, there could be an adverse impact on the demand for mobile phones, which reduces demand for headset
products. Likewise, should research establish a link between radio frequency emissions and wireless headsets and public concern in
this area grows, demand for our wireless headsets could be reduced creating a material adverse effect on our financial results.