Tesla 2011 Annual Report Download - page 66

Table of Contents
Our patent applications may not result in issued patents, which may have a material adverse effect on our ability to prevent others from
commercially exploiting products similar to ours.
We cannot be certain that we are the first creator of inventions covered by pending patent applications or the first to file patent applications
on these inventions, nor can we be certain that our pending patent applications will result in issued patents or that any of our issued patents will
afford protection against a competitor. In addition, patent applications filed in foreign countries are subject to laws, rules and procedures that
differ from those of the United States, and thus we cannot be certain that foreign patent applications related to issued U.S. patents will be issued.
Furthermore, if these patent applications issue, some foreign countries provide significantly less effective patent enforcement than in the United
States.
The status of patents involves complex legal and factual questions and the breadth of claims allowed is uncertain. As a result, we cannot be
certain that the patent applications that we file will result in patents being issued, or that our patents and any patents that may be issued to us in
the near future will afford protection against competitors with similar technology. In addition, patents issued to us may be infringed upon or
designed around by others and others may obtain patents that we need to license or design around, either of which would increase costs and may
adversely affect our business, prospects, financial condition and operating results.
Three of our trademark applications in the European Union remain subject to six outstanding opposition proceedings.
We currently sell and market our vehicles in the European Union under the Tesla trademark. We have three trademark applications in the
European Union for the Tesla trademark. These are subject to an outstanding opposition proceeding brought by a prior owner of trademarks
consisting of the word Tesla. If we cannot resolve these remaining oppositions and thereby secure registered rights in the European Union, this
will reduce our ability to challenge third party users of the Tesla trademark and dilute the value of the mark as our exclusive brand name in the
European Union. In addition, there is a risk that the remaining prior rights owner could in the future take action to challenge our use of the Tesla
mark in the European Union. This would have a severe impact on our position in the European Union and may inhibit our ability to use the Tesla
mark in the European Union. If we were prevented from using the Tesla trademark in the European Union, we would need to expend significant
additional financial and marketing resources on establishing an alternative brand identity in these markets.
We may be subject to claims arising from an airplane crash in which three of our employees died.
In February 2010, three of our employees died in a crash of an airplane owned and piloted by one of our employees. The plane crashed in a
neighborhood in East Palo Alto, California. The plane also clipped an electrical tower, causing a power loss and business interruption in parts of
Palo Alto, including Stanford University. The cause of the accident is under investigation by the National Transportation Safety Board.
In November 2010, a case was filed against us relating to the crash in California Superior Court. In that case, plaintiffs allege claims for
negligence, negligent infliction of emotional distress, trespass, and violations of federal and state aviation laws and regulations against all
defendants, and seek compensation for real property damage and loss of use, as well as personal property and emotional distress/bodily injury
claims. In December 2010, the plaintiffs settled claims for real property damage but retained her claims for emotional distress, bodily injury and
personal property damage. We believe that these remaining claims are covered by insurance.
As a result of the accident, other claims, including but not limited to those arising from loss of or damage to personal property, business
interruption losses or damage to the electrical tower and surrounding area, may be asserted against various parties including us. The time and
attention of our management may also be diverted in defending such claims. We may also incur costs both in defending against any claims and
for any judgments if such claims are adversely determined.
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