TeleNav 2010 Annual Report Download - page 36

We have received, and expect to receive in the future, demands for indemnification under these agreements.
These demands can be very expensive to settle or defend, and we have in the past incurred substantial legal fees
in connection with certain of these indemnity demands. For example, we have been notified by several wireless
carriers that they have been named as defendants in three patent infringement cases for which they may seek
indemnification from us. See the section entitled “Legal Proceedings.” These indemnity demands relate to
pending litigation and remain outstanding and unresolved as of the date of this Form 10-K. Large future
indemnity payments and associated legal fees and expenses, including potential indemnity payments and legal
fees and expenses relating to the current or future notifications, could materially harm our business, operating
results and financial condition.
We may in the future agree to defend and indemnify our wireless carrier partners in connection with the
pending notifications or future demands, irrespective of whether we believe that we have an obligation to
indemnify them or whether we believe that our services and products infringe the asserted intellectual property
rights. Alternatively, we may reject certain of our wireless carrier partners’ indemnity demands, which may lead
to disputes with our wireless carrier partners and may negatively impact our relationships with them or result in
litigation against us. Our wireless carrier partners may also claim that any rejection of their indemnity demands
constitutes a material breach of our agreements with them, allowing them to terminate such agreements. Our
agreements with Sprint and AT&T may be terminated in the event an infringement claim is made against us and
it is reasonably determined that there is a possibility our technology or services infringed upon a third party’s
rights. If, as a result of indemnity demands, we make substantial payments, our relationships with our wireless
carrier partners are negatively impacted or if any of our wireless carrier agreements is terminated, our business,
operating results and financial condition could be materially adversely affected. See the section entitled “Legal
Proceedings.”
Changes in government regulation of the wireless communications industry may adversely affect our
business.
It is possible that a number of laws and regulations may be adopted in the United States and elsewhere that
could restrict the wireless communications industry, including laws and regulations regarding lawful interception
of personal data, use of mobile phones while driving, privacy, taxation, content suitability, copyright and
antitrust. Furthermore, the growth and development of electronic storage of personal information may prompt
calls for more stringent consumer protection laws that may impose additional burdens on companies such as ours
that store personal information. We anticipate that regulation of our industry will increase and that we will be
required to devote legal and other resources to address this regulation. Changes in current laws or regulations or
the imposition of new laws and regulations in the United States or elsewhere regarding the wireless
communications industries may lessen the growth of wireless communications services and may materially
reduce our ability to increase or maintain sales of our LBS.
We may become subject to significant product liability costs.
If our LBS or products contain defects, there are errors in the maps supplied by third party map providers or
if our end users do not heed our warnings about the proper use of these products, collisions or accidents could
occur resulting in property damage, personal injury or death. If any of these events occurs, we could be subject to
significant liability for personal injury and property damage and under certain circumstances could be subject to
a judgment for punitive damages. We maintain limited insurance against accident related risks involving our
products. However, we cannot assure you that this insurance would be sufficient to cover the cost of damages to
others or will continue to be available at commercially reasonable rates. In addition, insurance coverage
generally will not cover awards of punitive damages and may not cover the cost of associated legal fees and
defense costs. If we are unable to maintain sufficient insurance to cover product liability costs or if our insurance
coverage does not cover an award, our business, financial condition and results of operations could be adversely
affected.
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