TeleNav 2011 Annual Report Download - page 37

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unless we obtain licenses from the holders of the patents or other intellectual property rights. We cannot assure you that we will be able to obtain
any such licenses on commercially reasonable terms, or at all. If we do not obtain such licenses, our business, operating results and financial
condition could be materially adversely affected and we could, for example, be required to cease offering our LBS or be required to materially
alter our LBS, which could involve substantial costs and time to develop.
Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, damages
caused by defective software and other losses.
Our agreements with our wireless carrier and automobile manufacturer and OEM customers include indemnification provisions. We agree
to indemnify them for losses suffered or incurred in connection with our LBS or navigation products, including as a result of intellectual property
infringement, damages caused by defects and damages caused by viruses, worms and other malicious software. The term of these indemnity
provisions is generally perpetual after execution of the corresponding agreement, and the maximum potential amount of future payments we
could be required to make under these indemnification provisions is generally substantial and may be unlimited. In addition, some of these
agreements permit our indemnitees to terminate their agreements with us if they determine that the use of our LBS or navigation products
infringes third party intellectual property.
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 certain 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 or automobile manufacturer and OEM customers 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 customers’ or automotive suppliers’ and manufacturers’ indemnity demands, which may lead to disputes with our wireless carrier or
automobile manufacturer and OEM customers and may negatively impact our relationships with them or result in litigation against us. Our
wireless carrier or automobile manufacturer and OEM customers 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 customers 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.”
The occurrence or perception of a security breach or disclosure of confidential information could harm our business.
Our LBS include the transmission and storage of personal, private and confidential information primarily related to the location of our end
users. If there is a security breach or if there is an inappropriate disclosure of any of these types of information, we could be exposed to
investigations, litigation, fines and penalties. Remediation of and liability for loss or misappropriation of end user or employee personal
information could have a material adverse effect on our business and financial results. Even if we were not held liable for such
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