From Alien's S-1 filing:
sec.gov
We may become subject to intellectual property infringement claims and other litigation that might be costly to resolve and, if resolved adversely, may harm our operating results or financial condition.
We may become a party to litigation, patent-related and otherwise, in the normal course of our business. Litigation can be expensive, lengthy and disruptive to normal business operations. The results of complex litigation matters are difficult to predict, and the uncertainty associated with substantial unresolved lawsuits could harm our business, financial condition, reputation and prospects. Negative developments with respect to lawsuits could cause our stock price to decline, and an unfavorable resolution of any particular lawsuit could have an adverse and possibly material effect on our business and results of operations.
Moreover, we may be involved in claims and legal proceedings that assert patent infringement claims or other intellectual property rights covering our products. We have received in the past, and may receive in the future, notices from third parties regarding potential infringement or licensing of patents or other intellectual property rights. In addition, we may be required to defend and indemnify our distributors, customers and other partners for claims of intellectual property infringement relating to our products under our agreements with our distributors, customers and other partners. We expect that the number and significance of these matters will increase as our business expands. In particular, we expect to face an increasing number of patent claims as the number of products and competitors in our industry grows and the functionality of products overlap. For example, Avery Dennison has notified certain equipment manufacturers that portions of their RFID tag manufacturing processes could infringe Avery Dennison’s intellectual property rights. In November 2005, Avery Dennison instituted litigation against two manufacturers of strap attach machines for infringing Avery Dennison’s patent relating to roll-to-roll production of RFID tag and label roll stock. Avery Dennison may in the future assert claims of infringement of this or other patents against us, our distributors, suppliers of our manufacturing equipment, customers or other partners. In addition, Intermec has on a number of occasions contacted us and other providers of RFID products and services about a royalty-bearing license of its RFID patent portfolio. Many providers of RFID products have obtained licenses under Intermec’s RFID Rapid Start Licensing Program, while we have not. Intermec may in the future assert claims of patent infringement against us or against our distributors, suppliers, customers or other resellers. Furthermore, we have received notice from XCI that they believe our multi-protocol reader infringes their multi-protocol reader patents. In addition, there are a large number of other companies who hold a significant number of patents related to RFID technologies. There can be no assurances that we will be able to obtain licenses from Avery Dennison, Intermec, XCI or other third parties who own patents, patent applications or other intellectual property related to RFID technologies on terms favorable to us or at all.
Any claims or proceedings against us, our indemnitors, or our indemnitees, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time, result in the diversion of significant operational resources, and require us to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms favorable to us or at all. The failure to obtain a license on commercially reasonable terms or the entry of an award of monetary damages against us or our indemnitees or an injunction that impairs our ability to market certain products or services could have a material adverse affect on our business, results of operation, financial condition or prospects. An unfavorable outcome in any such claim or proceeding could have a material adverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Any claim of patent infringement could result in significant monetary damages, which could include treble damages for willful infringement, and an injunction that prevents us from manufacturing or distributing certain products or performing certain services. Further, any settlement we enter into may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, would divert management attention from the business and cause us to incur costs, possibly material, to defend such matters. |
