Tesla 2011 Annual Report Download - page 65

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electronic power management systems may bring suits alleging infringement of such rights or otherwise asserting their rights and seeking
licenses. In addition, if we are determined to have infringed upon a third party’s intellectual property rights, we may be required to do one or
more of the following:
In the event of a successful claim of infringement against us and our failure or inability to obtain a license to the infringed technology, our
business, prospects, operating results and financial condition could be materially adversely affected. In addition, any litigation or claims, whether
or not valid, could result in substantial costs and diversion of resources and management attention.
We also license patents and other intellectual property from third parties, and we may face claims that our use of this in-licensed
technology infringes the rights of others. In that case, we may seek indemnification from our licensors under our license contracts with them.
However, our rights to indemnification may be unavailable or insufficient to cover our costs and losses, depending on our use of the technology,
whether we choose to retain control over conduct of the litigation, and other factors.
Our business will be adversely affected if we are unable to protect our intellectual property rights from unauthorized use or infringement
by third parties.
Any failure to protect our proprietary rights adequately could result in our competitors offering similar products, potentially resulting in the
loss of some of our competitive advantage and a decrease in our revenue which would adversely affect our business, prospects, financial
condition and operating results. Our success depends, at least in part, on our ability to protect our core technology and intellectual property. To
accomplish this, we rely on a combination of patents, patent applications, trade secrets, including know-how, employee and third party
nondisclosure agreements, copyright laws, trademarks, intellectual property licenses and other contractual rights to establish and protect our
proprietary rights in our technology. We have also received from third parties patent licenses related to manufacturing our vehicles.
The protection provided by the patent laws is and will be important to our future opportunities. However, such patents and agreements and
various other measures we take to protect our intellectual property from use by others may not be effective for various reasons, including the
following:
Existing trademark and trade secret laws and confidentiality agreements afford only limited protection. In addition, the laws of some
foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States, and policing the unauthorized use of
our intellectual property is difficult.
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cease selling, incorporating or using vehicles that incorporate the challenged intellectual property;
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pay substantial damages;
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obtain a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms or
at all; or
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redesign our vehicles.
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our pending patent applications may not result in the issuance of patents;
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our patents, if issued, may not be broad enough to protect our proprietary rights;
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the patents we have been granted may be challenged, invalidated or circumvented because of the pre
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existence of similar patented or
unpatented intellectual property rights or for other reasons;
• the costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may make
aggressive enforcement impracticable;
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current and future competitors may independently develop similar technology, duplicate our vehicles or design new vehicles in a way
that circumvents our patents; and
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our in
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licensed patents may be invalidated or the holders of these patents may seek to breach our license arrangements.