Rayovac 2010 Annual Report Download - page 35

technologies that are substantially equivalent or superior to our technology. Obtaining, protecting and defending
intellectual property rights can be time consuming and expensive, and may require us to incur substantial costs,
including the diversion of the time and resources of management and technical personnel.
Moreover, the laws of certain foreign countries in which we operate or may operate in the future do not
protect, and the governments of certain foreign countries do not enforce, intellectual property rights to the same
extent as do the laws and government of the U.S., which may negate our competitive or technological advantages
in such markets. Also, some of the technology underlying our products is the subject of nonexclusive licenses
from third parties. As a result, this technology could be made available to our competitors at any time. If we are
unable to establish and then adequately protect our intellectual property rights, our business, financial condition
and results of operations could be materially and adversely affected.
We license various trademarks, trade names and patents from third parties for certain of our products. These
licenses generally place marketing obligations on us and require us to pay fees and royalties based on net sales or
profits. Typically, these licenses may be terminated if we fail to satisfy certain minimum sales obligations or if
we breach the terms of the license. The termination of these licensing arrangements could adversely affect our
business, financial condition and results of operations.
In our Small Appliances segment, we license the use of the Black & Decker brand for marketing in certain
small household appliances in North America, South America (excluding Brazil) and the Caribbean. Sales of
Black & Decker branded products represented approximately 53% of the total consolidated revenue of our Small
Appliances segment in both Fiscal 2010 and Fiscal 2009. In December 2007, BDC extended the license
agreement through December 2012, with an automatic extension through December 2014 if certain milestones
are met regarding sales volume and product return. The failure to renew the license agreement with BDC or to
enter into a new agreement on acceptable terms could have a material adverse effect on our financial condition,
liquidity and results of operations.
Claims by third parties that we are infringing their intellectual property and other litigation could adversely
affect our business.
From time to time in the past we have been subject to claims that we are infringing the intellectual property
of others. We currently are the subject of such claims and it is possible that third parties will assert infringement
claims against us in the future. An adverse finding against us in these or similar trademark or other intellectual
property litigations may have a material adverse effect on our business, financial condition and results of
operations. Any such claims, with or without merit, could be time consuming and expensive, and may require us
to incur substantial costs, including the diversion of the resources of management and technical personnel, cause
product delays or require us to enter into licensing or other agreements in order to secure continued access to
necessary or desirable intellectual property. If we are deemed to be infringing a third party’s intellectual property
and are unable to continue using that intellectual property as we had been, our business and results of operations
could be harmed if we are unable to successfully develop non-infringing alternative intellectual property on a
timely basis or license non-infringing alternatives or substitutes, if any exist, on commercially reasonable terms.
In addition, an unfavorable ruling in intellectual property litigation could subject us to significant liability, as
well as require us to cease developing, manufacturing or selling the affected products or using the affected
processes or trademarks. Any significant restriction on our proprietary or licensed intellectual property that
impedes our ability to develop and commercialize our products could have a material adverse effect on our
business, financial condition and results of operations.
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