iRobot 2010 Annual Report Download - page 65

these sources. We cannot predict if we will be able to obtain replacement components within the time frames that we
require at an affordable cost, or at all.
Our products are complex and could have unknown defects or errors, which may give rise to claims
against us, diminish our brand or divert our resources from other purposes.
Our robots rely on the interplay among behavior-based artificially intelligent systems, real-world dynamic
sensors, user-friendly interfaces and tightly-integrated, electromechanical designs to accomplish their missions.
Despite testing, our new or existing products have contained defects and errors and may in the future contain
defects, errors or performance problems when first introduced, when new versions or enhancements are released, or
even after these products have been used by our customers for a period of time. These problems could result in
expensive and time-consuming design modifications or warranty charges, delays in the introduction of new
products or enhancements, significant increases in our service and maintenance costs, exposure to liability for
damages, mandatory or voluntary recall or product upgrades, damaged customer relationships and harm to our
reputation, any of which could materially harm our results of operations and ability to achieve market acceptance.
Our quality control procedures relating to the raw materials and components that it receives from third-party
suppliers as well as our quality control procedures relating to its products after those products are designed,
manufactured and packaged may not be sufficient. In addition, increased development and warranty costs,
including the costs of any mandatory or voluntary recall, could be substantial and could reduce our operating
margins. Moreover, because military robots are used in dangerous situations, the failure or malfunction of any of
these robots, including our own, could significantly damage our reputation and support for robot solutions in
general. The existence of any defects, errors, or failures in our products could also lead to product liability claims or
lawsuits against us. A successful product liability claim could result in substantial cost, diminish our brand and
divert management’s attention and resources, which could have a negative impact on our business, financial
condition and results of operations.
If we are unable to attract and retain additional skilled personnel, we may be unable to grow our
business.
To execute our growth plan, we must attract and retain additional, highly-qualified personnel. Competition for
hiring these employees is intense, especially with regard to engineers with high levels of experience in designing,
developing and integrating robots. Many of the companies with which we compete for hiring experienced
employees have greater resources than we have. If we fail to attract new technical personnel or fail to retain
and motivate our current employees, our business and future growth prospects could be severely harmed.
We may be sued by third parties for alleged infringement of their proprietary rights, which could be
costly, time-consuming and limit our ability to use certain technologies in the future.
If the size of our markets increases, we would be more likely to be subject to claims that our technologies
infringe upon the intellectual property or other proprietary rights of third parties. In addition, the vendors from
which we license technology used in our products could become subject to similar infringement claims. Our
vendors, or we, may not be able to withstand third-party infringement claims. Any claims, with or without merit,
could be time- consuming and expensive, and could divert our management’s attention away from the execution of
our business plan. Moreover, any settlement or adverse judgment resulting from the claim could require us to pay
substantial amounts or 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. There can be no assurance that we would be able to obtain a license
from the third party asserting the claim on commercially reasonable terms, if at all, that we would be able to develop
alternative technology on a timely basis, if at all, or that we would be able to obtain a license to use a suitable
alternative technology to permit us to continue offering, and our customers to continue using, our affected product.
In addition, we may be required to indemnify our retail and distribution partners for third-party intellectual property
infringement claims, which would increase the cost to us of an adverse ruling in such a claim. An adverse
determination could also prevent us from offering our products to others. Infringement claims asserted against us or
our vendors may have a material adverse effect on our business, results of operations or financial condition.
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Form 10-K