SanDisk 2014 Annual Report Download - page 103

required to develop new technologies or pay significant monetary damages or are required to make
substantial royalty payments, our business and results of operations would be harmed.
We rely on trade secrets to protect some of our intellectual property. Trade secrets are difficult to
maintain and protect. We have taken measures to protect our trade secrets and proprietary information,
such as the use of confidentiality agreements with employees and business partners, but there is no
guarantee that these measures will be effective. These agreements may be unenforceable or difficult and
costly to enforce, and our proprietary information may be stolen or misused, otherwise become known or
be independently developed by competitors. Enforcement of claims that a third party has illegally obtained
or used trade secrets is expensive, time consuming and uncertain. In addition, foreign courts are sometimes
less willing than domestic courts to protect trade secrets. Our failure to obtain or maintain trade secret
protection could adversely affect our competitive position and harm our business.
The success of our branded products depends in part on the positive image that consumers have of
our brands. We believe the popularity of our brands makes them a target of counterfeiting or imitation,
with third parties attempting to pass off counterfeit products as our products. Any occurrence of
counterfeiting, imitation or confusion with our brands could adversely affect our reputation and impair the
value of our brands, which in turn could negatively impact sales of our branded products, our market share
and our gross margin, as well as increase our administrative costs related to brand protection and
counterfeit detection and prosecution.
We and our suppliers rely upon certain rare earth materials that are necessary for the manufacturing of our
products, and our business could be harmed if we or our suppliers experience shortages or delays of these rare
earth materials. Rare earth materials are critical to the manufacture of some of our products. We and/or
our suppliers acquire these materials from a number of countries, including the People’s Republic of
China. We cannot predict whether the government of China or any other nation will impose regulations,
quotas or embargoes upon the materials incorporated into our products that would restrict the worldwide
supply of these materials or increase their cost. If China or any other major supplier were to restrict the
supply available to us or our suppliers or increase the cost of the materials used in our products, we could
experience a shortage in supply and an increase in production costs, which would harm our operating
results.
We and certain of our officers are at times involved in litigation, including litigation regarding our IP rights
or that of third parties, which may be costly, may divert the efforts of our key personnel and could result in
adverse court rulings, which could materially harm our business. We are often involved in litigation, including
cases involving our IP rights and those of others. We are the plaintiff in some of these actions and the
defendant in others. Some of the actions seek injunctions against the sale of our products and/or
substantial monetary damages, which if granted or awarded, could materially harm our business, financial
condition and operating results.
Litigation is subject to inherent risks and uncertainties that may cause actual results to differ
materially from our expectations. Factors that could cause litigation results to differ include, but are not
limited to, the discovery of previously unknown facts, changes in the law or in the interpretation of laws,
and uncertainties associated with the judicial decision-making process. If we receive an adverse judgment
in any litigation, we could be required to pay substantial damages and/or cease the manufacture, use and
sale of products. Litigation, including IP litigation, can be complex, can extend for a protracted period of
time, can be very expensive, and the expense can be unpredictable. Litigation initiated by us could also
result in counter-claims against us, which could increase the costs associated with the litigation and result
in our payment of damages or other judgments against us. In addition, litigation may divert the efforts and
attention of some of our key personnel.
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Annual Report