Tesla 2016 Annual Report Download - page 25

We may need to defend ourselves against patent or trademark infringement claims, which may be time-consuming and would cause us to incur
substantial costs.
Companies,organizationsorindividuals,includingourcompetitors,mayholdorobtainpatents,trademarksorotherproprietaryrightsthatwouldprevent,
limitorinterferewithourabilitytomake,use,develop,sellormarketourvehiclesorcomponents,whichcouldmakeitmoredifficultforustooperateour
business.Fromtimetotime,wemayreceivecommunicationsfromholdersofpatentsortrademarksregardingtheirproprietaryrights.Companiesholdingpatents
orotherintellectualpropertyrightsmaybringsuitsalleginginfringementofsuchrightsorotherwiseasserttheirrightsandurgeustotake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:
·ceaseselling,incorporatingcertaincomponentsinto,orusingvehiclesorofferinggoodsorservicesthatincorporateorusethechallengedintellectual
property;
·paysubstantialdamages;
·seekalicensefromtheholderoftheinfringedintellectualpropertyright,whichlicensemaynotbeavailableonreasonabletermsoratall;
·redesignourvehiclesorothergoodsorservices;or
·establishandmaintainalternativebrandingforourproductsandservices.
Intheeventofasuccessfulclaimofinfringementagainstusandourfailureorinabilitytoobtainalicensetotheinfringedtechnologyorotherintellectual
propertyright,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,negativepublicityanddiversionofresourcesandmanagementattention.
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defensiveportfolio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
willresultinissuedpatentsinthoseforeignjurisdictionsorthatsuchpatentscanbeeffectivelyenforced,eveniftheyrelatetopatentsissuedintheU.S.Inaddition,
othersmayobtainpatentsthatweneedtotakealicenseto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havefiledtradeandservicemarkapplicationsforourTeslamarksinvariouscountriesinwhichwecurrentlysellandplantosellourproductsand
services.Certainofourapplicationsaresubjecttooutstandingoppositionproceedingsbroughtbyownersorapplicantsallegingpriorapplicationsfororuseof
similarmarks,orrefusalsissuedbytrademarkofficescitingpriorapplicationsorregistrationsforallegedlysimilarmarks.Ifwecannotresolvetheseoppositions
andrefusalsandtherebysecureregisteredrightsinthesecountries,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.
OurcorporateheadquartersandprimarymanufacturingfacilitiesarealllocatedinNorthernCalifornia,aregionknownforseismicactivity.Ifmajor
disasterssuchasearthquakes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.Wemayincurexpensesrelatingto
suchdamages,whichcouldhaveamaterialadverseimpactonourbusiness,operatingresultsandfinancialcondition.
24