Rayovac 2011 Annual Report Download - page 33

business in these countries. In addition, social legislation in many countries in which we operate may result in
significantly higher expenses associated with labor costs, terminating employees or distributors and closing
manufacturing facilities. Increases in our costs as a result of increased regulation, legislation or enforcement could
materially and adversely affect our business, results of operations and financial condition.
We may not be able to adequately establish and protect our intellectual property rights, and the
infringement or loss of our intellectual property rights could harm our business.
To establish and protect our intellectual property rights, we rely upon a combination of national, foreign and
multi-national patent, trademark and trade secret laws, together with licenses, confidentiality agreements and
other contractual arrangements. The measures that we take to protect our intellectual property rights may prove
inadequate to prevent third parties from infringing or misappropriating our intellectual property. We may need to
resort to litigation to enforce or defend our intellectual property rights. If a competitor or collaborator files a
patent application claiming technology also claimed by us, or a trademark application claiming a trademark,
service mark or trade dress also used by us, in order to protect our rights, we may have to participate in expensive
and time consuming opposition or interference proceedings before the U.S. Patent and Trademark Office or a
similar foreign agency. Similarly, our intellectual property rights may be challenged by third parties or
invalidated through administrative process or litigation. The costs associated with protecting intellectual property
rights, including litigation costs, may be material. For example, our Small Appliances segment has spent several
million dollars on protecting its patented automatic litter box business over the last few years. Furthermore, even
if our intellectual property rights are not directly challenged, disputes among third parties could lead to the
weakening or invalidation of our intellectual property rights, or our competitors may independently develop
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 Global Batteries & 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 14% of the total consolidated
revenue in Fiscal 2011. In July 2011, BDC extended the license agreement through December 2015. 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
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