iRobot 2015 Annual Report Download - page 94

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infringe patents held by others or that they will not in the future. We have received in the past communications from third
parties relating to technologies used in our various robot products that have alleged infringement of patents or violation of other
intellectual property rights. In response to these communications, we have contacted these third parties to convey our good
faith belief 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. Following closing of the sale of our defense and security business unit, we
will be subject to certain of these regulations only as they pertain to matters related to our operation of the defense and security
business unit prior to the sale. Among the most significant U.S. federal government regulations currently 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 reimbursement
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. 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.