Medtronic 2016 Annual Report Download - page 23

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reimbursement or result in the denial of coverage, which could have an impact on the acceptance of and demand for our products
and the prices that our customers are willing to pay for them.
The laws and regulations of health care goods and services that are applicable to us, including those described above, are subject
to evolving interpretations. If a governmental authority were to conclude that we are not in compliance with applicable laws and
regulations, we and our officers and employees could be subject to severe criminal and civil penalties, including, for example,
exclusion from participation as a supplier of product to beneficiaries covered by CMS. Any failure to comply with laws and
regulations relating to reimbursement and health care goods and services could adversely affect our reputation, business, financial
condition and cash flows.
We are substantially dependent on patent and other proprietary rights and failing to protect such rights or to be successful in
litigation related to our rights or the rights of others may result in our payment of significant monetary damages and/or royalty
payments, negatively impact our ability to sell current or future products, or prohibit us from enforcing our patent and other
proprietary rights against others.
We are substantially dependent on patent and other proprietary rights and rely on a combination of patents, trade secrets, and non-
disclosure and non-competition agreements to protect our proprietary intellectual property. We also operate in an industry
characterized by extensive patent litigation. Patent litigation against us can result in significant damage awards and injunctions
that could prevent our manufacture and sale of affected products or require us to pay significant royalties in order to continue to
manufacture or sell affected products. At any given time, we are generally involved as both a plaintiff and a defendant in a number
of patent infringement actions, the outcomes of which may not be known for prolonged periods of time. While it is not possible
to predict the outcome of patent litigation, we believe the results associated with any such litigation could result in our payment
of significant monetary damages and/or royalty payments, negatively impact our ability to sell current or future products, or
prohibit us from enforcing our patent and proprietary rights against others, which would generally have a material adverse impact
on our consolidated earnings, financial condition, and/or cash flows.
While we intend to defend against any threats to our intellectual property, our patents, trade secrets, or other agreements may not
adequately protect our intellectual property. Further, pending patent applications owned by us may not result in patents being
issued to us, patents issued to or licensed by us in the past or in the future may be challenged or circumvented by competitors and
such patents may be found invalid, unenforceable or insufficiently broad to protect our technology or to provide us with any
competitive advantage. Third parties could obtain patents that may require us to negotiate licenses to conduct our business, and
the required licenses may not be available on reasonable terms or at all. We also rely on non-disclosure and non-competition
agreements with certain employees, consultants, and other parties to protect, in part, trade secrets and other proprietary rights. We
cannot be certain that these agreements will not be breached, that we will have adequate remedies for any breach, that others will
not independently develop substantially equivalent proprietary information, or that third parties will not otherwise gain access to
our trade secrets or proprietary knowledge.
In addition, the laws of certain countries in which we market some of our products do not protect our intellectual property rights
to the same extent as the laws of the U.S., which could make it easier for competitors to capture market position in such countries
by utilizing technologies that are similar to those developed or licensed by us. Competitors also may harm our sales by designing
products that mirror the capabilities of our products or technology without infringing our intellectual property rights. If we are
unable to protect our intellectual property in these countries, it could have a material adverse effect on our business, financial
condition or results of operations.
Quality problems with, and product liability claims in connection with, our processes, goods, and services, could lead to recalls
or safety alerts, harm our reputation and have a material adverse effect on our business, results of operations, financial condition
and our cash flows.
Quality is extremely important to us and our customers due to the serious and costly consequences of product failure and our
business exposes us to potential product liability risks that are inherent in the design, manufacture, and marketing of medical
devices. In addition, many of our products are often used in intensive care settings with seriously ill patients and some of the
medical devices we manufacture and sell are designed to be implanted in the human body for long periods of time or indefinitely.
Component failures, manufacturing defects, design flaws, off-label use, or inadequate disclosure of product-related risks or product-
related information with respect to our products could result in an unsafe condition or injury to, or death of, a patient. These
problems could lead to recall of, or issuance of a safety alert relating to, our products, and could result in product liability claims
and lawsuits, including class actions, which could ultimately result, in certain cases, in the removal from the body of such products
and claims regarding costs associated therewith. Due to the strong name recognition of the Medtronic and Covidien brands, a
material adverse event involving one of our products could result in reduced market acceptance and demand for all products within
that brand, and could harm our reputation and ability to market products in the future.