iRobot 2008 Annual Report Download - page 64

that we do not infringe the patents in question or otherwise violate those parties’ rights. Although there have been no
additional actions or communications with respect to these allegations, we cannot assure you that we will not
receive further correspondence from these parties, or not be subject to additional allegations of infringement from
others. Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to
determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or
invalidity, misappropriation, or other claims. Any such litigation could result in substantial costs and diversion of
our resources. Moreover, any settlement of or adverse judgment resulting from such litigation could require us to
obtain a license to continue to use the technology that is the subject of the claim, or otherwise restrict or prohibit our
use of the technology. Any required licenses may not be available to us on acceptable terms, if at all. If we attempt to
design around the technology at issue or to find another provider of suitable alternative technology to permit us to
continue offering applicable software or product solutions, our continued supply of software or product solutions
could be disrupted or our introduction of new or enhanced software or products could be significantly delayed.
Regulations
We are subject to various government regulations, including various U.S. federal government regulations as a
contractor and subcontractor to the U.S. federal government. Among the most significant U.S. federal government
regulations affecting our business are:
• the Federal Acquisition Regulations and supplemental agency regulations, which comprehensively regulate
the formation and administration of, and performance under government contracts;
• the Truth in Negotiations Act, which requires certification and disclosure of all cost and pricing data in
connection with contract negotiations;
• the Cost Accounting Standards, which impose accounting requirements that govern our right to reimburse-
ment under cost-based government contracts;
• the Foreign Corrupt Practices Act, which prohibits U.S. companies from providing anything of value to a
foreign official to help obtain, retain or direct business, or obtain any unfair advantages;
• the False Claims Act and the False Statements Act, which, respectively, impose penalties for payments made
on the basis of false facts provided to the government, and impose penalties on the basis of false statements,
even if they do not result in a payment; and
• laws, regulations and executive orders restricting the use and dissemination of information classified for
national security purposes and the exportation of certain products and technical data.
We also need special security clearances to continue working on and advancing certain of our projects with the
U.S. federal government. Classified programs generally will require that we comply with various Executive Orders,
federal laws and regulations and customer security requirements that may include restrictions on how we develop,
store, protect and share information, and may require our employees to obtain government clearances.
The nature of the work we do for the federal government may also limit the parties who may invest in or
acquire us. Export laws may keep us from providing potential foreign acquirers with a review of the technical data
they would be acquiring. In addition, there are special requirements for foreign parties who wish to buy or acquire
control or influence over companies that control technology or produce goods in the security interests of the
United States. There may need to be a review under the Exon-Florio provisions of the Defense Production Act.
Finally, the government may require a prospective foreign owner to establish intermediaries to actually run that part
of the company that does classified work, and establishing a subsidiary and its separate operation may make such an
acquisition less appealing to such potential acquirers.
In addition, the export from the United States of many of our products may require the issuance of a license by
the U.S. Department of Commerce under the Export Administration Act, as amended, and its implementing
Regulations as kept in force by the International Emergency Economic Powers Act of 1977, as amended. Some of
our products may require the issuance of a license by the U.S. Department of State under the Arms Export Control
Act and its implementing Regulations, which licenses are generally harder to obtain and take longer to obtain than
do Export Administration Act licenses.
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