iRobot 2009 Annual Report Download - page 63

Form 10-K
• The sale of our products in countries outside the United States is regulated by the governments of those
countries. While compliance with such regulation will generally be undertaken by international distributors,
we may assist with such compliance and in certain cases may be liable if a distributor fails to comply.
Also, we need special clearances to continue working on and advancing certain of our projects with the
U.S. federal government. Obtaining and maintaining security clearances for employees involves a lengthy process,
and it is difficult to identify, recruit and retain employees who already hold security clearances. If our employees are
unable to obtain security clearances in a timely manner, or at all, or if our employees who hold security clearances
are unable to maintain the clearances or terminate employment with us, then a customer requiring classified work
could terminate the contract or decide not to renew it upon its expiration. In addition, we expect that many of the
contracts on which we will bid will require us to demonstrate our ability to obtain facility security clearances and
employ personnel with specified types of security clearances. To the extent we are not able to obtain facility security
clearances or engage employees with the required security clearances for a particular contract, we may not be able
to bid on or win new contracts, or effectively rebid on expiring contracts. For example, if we were to lose our
security clearance, we would be unable to continue to participate in the U.S. Army’s Brigade Combat Team
Modernization program. 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.
Our failure to comply with applicable regulations, rules and approvals could result in the imposition of
penalties, the loss of our government contracts or our suspension or debarment from contracting with the federal
government generally, any of which would harm our business, financial condition and results of operations.
If we fail to protect, or incur significant costs in defending, our intellectual property and other
proprietary rights, our business and results of operations could be materially harmed.
Our success depends on our ability to protect our intellectual property and other proprietary rights. We rely
primarily on patents, trademarks, copyrights, trade secrets and unfair competition laws, as well as license
agreements and other contractual provisions, to protect our intellectual property and other proprietary rights.
Significant technology used in our products, however, is not the subject of any patent protection, and we may be
unable to obtain patent protection on such technology in the future. Moreover, existing U.S. legal standards relating
to the validity, enforceability and scope of protection of intellectual property rights offer only limited protection,
may not provide us with any competitive advantages, and may be challenged by third parties. In addition, the laws of
countries other than the United States in which we market our products may afford little or no effective protection of
our intellectual property. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing
upon or misappropriating our intellectual property or otherwise gaining access to our technology. Unauthorized
third parties may try to copy or reverse engineer our products or portions of our products or otherwise obtain and use
our intellectual property. Some of our contracts with the U.S. federal government allow the federal government to
disclose technical data regarding the products developed on behalf of the government under the contract without
constraining the recipient on how it is used. This ability of the government creates the potential that third parties
may be able to use this data to compete with us in the commercial sector. If we fail to protect our intellectual
property and other proprietary rights, our business, results of operations or financial condition could be materially
harmed.
In addition, defending our intellectual property rights may entail significant expense. We believe that certain
products in the marketplace may infringe our existing intellectual property rights. We have, from time to time,
resorted to legal proceedings to protect our intellectual property and may continue to do so in the future. We may be
required to expend significant resources to monitor and protect our intellectual property rights. Any of our
intellectual property rights may be challenged by others or invalidated through administrative processes or
litigation. If we resort to legal proceedings to enforce our intellectual property rights or to determine the validity
and scope of the intellectual property or other proprietary rights of others, the proceedings could result in significant
expense to us and divert the attention and efforts of our management and technical employees, even if we were to
prevail.
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