Tesla 2015 Annual Report Download - page 39

Our patent applications may not result in issued patents, which may have a material adverse effect on our ability to prevent others from
interfering with our commercialization of our products.
The status of patents involves complex legal and factual questions and the breadth and effectiveness of patented claims is uncertain. 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
sufficient protection against someone creating a knockoff of our products, or as a defense against a competitor who claims that we are infringing
its patents. 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 result in issued patents in those foreign
jurisdictions. In addition, 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.
Our trademark applications in certain countries remain subject to outstanding opposition proceedings.
We currently sell and market our products and services in various countries under our Tesla marks. We have filed trademark applications
for our Tesla marks and opposition proceedings to trademark applications of third parties in various countries in which we currently sell and plan
to sell our products and services. Certain of our trademark applications are subject to outstanding opposition proceedings brought by owners or
applicants alleging prior applications for or use of similar marks. If we cannot resolve these oppositions and thereby secure registered rights in
these countries, our ability to challenge third party users of the Tesla marks will be reduced and the value of the marks representing our exclusive
brand name in these countries will be diluted. In addition, there is a risk that the prior rights owners could in the future take actions to challenge
our use of the Tesla marks in these countries. Such actions could have a severe impact on our position in these countries and may inhibit our
ability to use the Tesla marks in these countries. If we were prevented from using the Tesla marks in any or all of these countries, we would need
to expend significant additional financial and marketing resources on establishing an alternative brand identity in these markets.
Our facilities or operations could be damaged or adversely affected as a result of disasters or unpredictable events.
Our corporate headquarters in Palo Alto, Tesla Factory in Fremont and additional component manufacturing facilities in Lathrop are
located in Northern California, a region known for seismic activity. If major disasters such as earthquakes, fires, floods, hurricanes, wars,
terrorist attacks, computer viruses, pandemics or other events occur, or our information system or communications network breaks down or
operates improperly, our headquarters and production facilities may be seriously damaged, or we may have to stop or delay production and
shipment of our products. In addition, our lease for our Palo Alto facility permits the landlord to terminate the lease following a casualty event if
the needed repairs are in excess of certain thresholds and we do not agree to pay for any uninsured amounts. We may incur expenses relating to
such damages, which could have a material adverse impact on our business, operating results and financial condition.
If our suppliers fail to use ethical business practices and comply with applicable laws and regulations, our brand image could be harmed
due to negative publicity.
Our core values, which include developing the highest quality electric vehicles while operating with integrity, are an important component
of our brand image, which makes our reputation particularly sensitive to allegations of unethical business practices. We do not control our
independent suppliers or their business practices. Accordingly, we cannot guarantee their compliance with ethical business practices, such as
environmental responsibility, fair wage practices, appropriate sourcing of raw materials, and compliance with child labor laws, among others. A
lack of demonstrated compliance could lead us to seek alternative suppliers, which could increase our costs and result in delayed delivery of our
products, product shortages or other disruptions of our operations.
Violation of labor or other laws by our suppliers or the divergence of an independent supplier’s labor or other practices from those
generally accepted as ethical in the United States or other markets in which we do business could also attract negative publicity for us and our
brand. This could diminish the value of our brand image and reduce demand for our performance electric vehicles if, as a result of such violation,
we were to attract negative publicity. If we, or other manufacturers in our industry, encounter similar problems in the future, it could harm our
brand image, business, prospects, financial condition and operating results.
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