TeleNav 2012 Annual Report Download - page 34

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partners by determining the scope, enforceability and validity of third party proprietary rights or to establish our proprietary rights. Some of our
competitors may have substantially greater resources than we do and may be able to sustain the costs of complex intellectual property litigation to a
greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely on extracting royalties and
settlements by enforcing patent rights may target us, our wireless carrier customers or our other business partners. These companies typically have
little or no product revenue and therefore our patents may provide little or no deterrence against such companies filing patent infringement lawsuits
against us. Regardless of whether claims that we are infringing patents or other intellectual property rights have any merit, these claims are time
consuming and costly to evaluate and defend and could:
In addition to liability for monetary damages against us or, in certain circumstances, our customers, we may be prohibited from developing,
commercializing or continuing to provide certain of our navigation services 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 navigation services or be required to materially alter our navigation services, 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 customers include indemnification provisions. We agree to indemnify them for losses suffered or incurred in
connection with our navigation services or 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 navigation services or 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 and settlement costs in connection with certain of these
indemnity demands. Furthermore, we have been notified by several customers 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 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 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 customers’ indemnity demands, which may lead to disputes with our
customers and may negatively impact our relationships with them or result in litigation against us. Our 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 certain customers 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 customers are negatively impacted or if any of our customer agreements is terminated, our business, operating results and
financial condition could be materially adversely affected. See Part I, Item 3, “Legal Proceedings.”
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adversely affect our relationships with our current or future customers and other business partners;
• cause delays or stoppages in the shipment of Telenav enabled or preloaded mobile phones or vehicles, or cause us to modify or suspend
the provision of our navigation services;
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cause us to incur significant expenses in defending claims brought against our customers, other business partners or us;
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divert management's attention and resources;
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subject us to significant damages or settlements;
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require us to enter into settlements, royalty or licensing agreements on unfavorable terms; or
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require us or our business partners to cease certain activities and/or modify our products or services.