Western Digital 2015 Annual Report Download - page 34

‰we may lose the rights to technology or products being developed by the strategic relationship, including if
our partner is acquired by another company, files for bankruptcy or experiences financial or other losses;
‰we may experience difficulties or delays in collecting amounts due to us from our co-venturers;
‰the terms of our arrangements may turn out to be unfavorable; and
‰changes in tax, legal or regulatory requirements may necessitate changes in the agreements with our co-venturers.
If our strategic relationships are unsuccessful, our business, results of operations or financial condition may be
adversely affected.
The loss of our key executive management, staff and skilled employees, the inability to hire and integrate new employees or
decisions to realign our business could negatively impact our business prospects.
Our success depends upon the continued contributions of our key management, staff and skilled employees,
many of whom would be extremely difficult to replace. Global competition for skilled employees in the data storage
industry is intense and, as we attempt to move to a position of technology leadership in the storage industry, our
business success becomes increasingly dependent on our ability to retain our key staff and skilled employees, to
attract, integrate and retain new skilled employees and to make decisions to realign our business to take advantage of
efficiencies or reduce redundancies. Volatility or lack of positive performance in our stock price and the overall mar-
kets may adversely affect our ability to retain key staff or skilled employees who have received equity compensation.
Additionally, because a substantial portion of our key employees’ compensation is placed “at risk” and linked to the
performance of our business, when our operating results are negatively impacted, we are at a competitive disadvantage
for retaining and hiring key management, staff and skilled employees versus other companies that pay a relatively
higher fixed salary. If we lose our existing key management, staff or skilled employees, or are unable to hire and
integrate new key management, staff or skilled employees, or if we fail to implement succession plans for our key
management or staff, our operating results would likely be harmed. Furthermore, if we do not realize the anticipated
benefits of our intended realignment after we make decisions regarding our personnel and implement our realignment
plans, our operating results could be adversely affected.
The nature of our industry and its reliance on intellectual property and other proprietary information subjects us and our
suppliers and customers to the risk of significant litigation.
The data storage industry has been characterized by significant litigation. This includes litigation relating to
patent and other intellectual property rights, product liability claims and other types of litigation. Intellectual prop-
erty risks increase when we enter into new markets where we have little or no intellectual property protection as a
defense against litigation. Litigation can be expensive, lengthy and disruptive to normal business operations. More-
over, the results of litigation are inherently uncertain and may result in adverse rulings or decisions. We may enter
into settlements or be subject to judgments that may, individually or in the aggregate, have a material adverse effect
on our business, financial condition or operating results. As disclosed in Part II, Item 8, Note 5 of the Notes to Con-
densed Consolidated Financial Statements included in this Annual Report on Form 10-K, in relation to our litigation
matter with Seagate, on October 8, 2014, the Minnesota Supreme Court affirmed the decision of the Minnesota Court
of Appeals, and as a result on October 14, 2014, we paid Seagate $773.4 million to satisfy the full amount of the final
arbitration award plus interest accrued through October 13, 2014.
We evaluate notices of alleged patent infringement and notices of patents from patent holders that we receive
from time to time. If claims or actions are asserted against us, we may be required to obtain a license or cross-license,
modify our existing technology or design a new non-infringing technology. Such licenses or design modifications can
be extremely costly. In addition, we may decide to settle a claim or action against us, which settlement could be
costly. We may also be liable for any past infringement. If there is an adverse ruling against us in an infringement
lawsuit, an injunction could be issued barring production or sale of any infringing product. It could also result in a
damage award equal to a reasonable royalty or lost profits or, if there is a finding of willful infringement, treble dam-
ages. Any of these results would increase our costs and harm our operating results. In addition, our suppliers and cus-
tomers are subject to similar risks of litigation, and a material, adverse ruling against a supplier or customer could
negatively impact our business.
28