Plantronics 2015 Annual Report Download - page 30

Patents, copyrights, trademarks, and trade secrets are owned by individuals or entities that may make claims or commence litigation
based on allegations of infringement or other violations of intellectual property rights. These claims or allegations may relate to
intellectual property that we develop or the intellectual property incorporated in the materials or components provided by one or
more suppliers. As we have grown, the intellectual property rights claims against us and our suppliers have increased. There has
also been a general trend of increasing intellectual property infringement claims against corporations that make and sell products.
Our products, technologies and the components and materials contained in our products 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 or our suppliers 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 or materials or components included in those 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 and
result in substantial settlements or damages awards, our products being enjoined, and the loss of a distribution channel or retail
partner, any of which may have a material adverse impact on our operating results.
We must comply with various regulatory requirements, and changes in or new regulatory requirements may adversely impact
our gross margins, reduce our ability to generate revenues if we are unable to comply, or decrease demand for our products
if the actual or perceived quality of our products are negatively impacted.
Our products must meet requirements set by regulatory authorities in each jurisdiction in which we sell them. For example, certain
of our Enterprise products must meet local phone system standards. Certain of our wireless products must work within existing
permitted frequency ranges. Moreover, competition for limited radio frequency bandwidth as a result of an increasing use of
wireless products increases the risk of interference or diminished product performance. In particular, the release of a third party
wireless device in the U.S. that operates in the unlicensed 903-928 megahertz radio frequency range using significantly higher
power than our wireless products and those of many other users of the unlicensed frequency range may cause our wireless products
to experience interference which, if material, may harm our reputation and adversely affect our sales.
As regulations and local laws change and competition increases, we may need to modify our products to address those changes.
Regulatory restrictions and competition 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 we attempt to pass along the costs. Compliance with regulatory
restrictions and bandwidth limitations may impact the actual or perceived technical quality and capabilities of our products,
reducing their marketability. In addition, if the products we supply to various jurisdictions fail to comply with the applicable local
or regional regulations, if our customers or merchants provide products into unauthorized jurisdictions or our products interfere
with the proper operation of other devices, we or consumers purchasing our products may be responsible for the damages that our
products cause; thereby causing us to alter the performance of our products, pay substantial monetary damages or penalties, cause
harm to our reputation, or cause us to suffer other adverse consequences.
Moreover, new regulations may negatively adversely affect our ability to procure or manufacture our products. For instance, as
part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Securities and Exchange Commission ("SEC")
adopted disclosure requirements regarding the use of certain minerals, known as conflict minerals, which are mined from the
Democratic Republic of Congo and adjoining countries, as well as procedures regarding a manufacturer's efforts to identify and
prevent the sourcing of such minerals and metals produced from those minerals. Additional reporting obligations are being
considered by the European Union. The U.S. requirements and any additional European requirements could affect the sourcing
and availability of metals used in the manufacture of a number of parts contained in our products. For example, these disclosure
requirements may decrease the number of suppliers capable of supplying our needs for certain metals or we may be unable to
conclusively verify the origins of all metals used in our products. We may suffer financial and reputational harm if customers
require, and we are unable to deliver, certification that our products are conflict free. Regardless, we continue to incur costs
associated with compliance, including time-consuming and costly efforts to determine the source of minerals used in our products.
We are exposed to potential lawsuits alleging defects in our products and other claims related to the use of our products.
The sales of our products expose us to the risk of product liability, including hearing loss claims. Although product-related claims
are asserted against us periodically, to date none of the claims have materially affected our business, financial condition, or results
of operations. Nevertheless, there is no guarantee that future claims will not materially negatively impact our business or result
in substantial damages, or both.
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