iRobot 2015 Annual Report Download - page 101

Form 10-K
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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.
We collect, store, process, and use customer data, including certain personal and robot-specific information, which
subjects us to governmental regulation and other legal obligations related to privacy, information security, and data
protection, and any security breaches or our actual or perceived failure to comply with such legal obligations could harm
our business.
Our latest Roomba products, as well as additional products in development, collect, store, process, and use certain
customer data, which subjects us to governmental regulation and other legal obligations related to privacy, information security,
and data protection, and any security breaches or our actual or perceived failure to comply with such legal obligations could
harm our business. We collect, store, process, and use personal information and other user data, and we rely on third parties that
are not directly under our control to do so as well. If our security measures, some of which are managed by third parties, are
breached or fail, unauthorized persons may be able to obtain access to or acquire sensitive user data, which may expose us to a
risk of loss, litigation, or regulatory proceedings. Depending on the nature of the information compromised, in the event of a
data breach or other unauthorized access to or acquisition of our user data, we may also have obligations to notify users about
the incident, and we may need to provide some form of remedy, such as a subscription to a credit monitoring service, for the
individuals affected by the incident. A growing number of legislative and regulatory bodies have adopted consumer notification
requirements in the event of unauthorized access to or acquisition of certain types of personal data. Such breach notification
laws continue to evolve and may be inconsistent from one jurisdiction to another. Complying with these obligations could
cause us to incur substantial costs and could increase negative publicity surrounding any incident that compromises user data.
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