Motorola 2008 Annual Report Download - page 34

with patents, copyrights, trademarks, trade secret laws, confidentiality agreements and other methods. We also
generally restrict access to and distribution of our proprietary information. Despite these precautions, it may be
possible for a third party to obtain and use our proprietary information or develop similar technology
independently. In addition, effective patent, copyright, trademark and trade secret protection may be unavailable or
limited in certain foreign countries. Unauthorized use of our intellectual property rights by third parties and the
cost of any litigation necessary to enforce our intellectual property rights could have an adverse impact on our
business.
As we expand our business, including through acquisitions, and compete with new competitors in new
markets, the breadth and strength of our intellectual property portfolio in those new areas may not be as
developed as in our longer-standing businesses. This may expose us to a heightened risk of litigation and other
challenges from competitors in these new markets.
We face risks related to ongoing patent-related disputes between Qualcomm and Broadcom.
Motorola is a purchaser of CDMA EV-DO baseband processor chips and chipsets from Qualcomm
Incorporated (“Qualcomm”), and we previously announced an intention to design certain of Qualcomm’s W-
CDMA chipsets into certain of our 3G handsets. Qualcomm and Broadcom Corporation (“Broadcom”) are
engaged in several patent-related legal actions. In certain of these actions, Broadcom is seeking orders to ban the
importation into the U.S. of Qualcomm’s infringing EV-DO and W-CDMA baseband processor chipsets and certain
“downstream” products that contain them (including Motorola handsets) and/or limit Qualcomm’s ability to
provide certain services and products in the U.S. relating to such infringing chipsets. A final outcome adverse to
Qualcomm in any of the patent-related legal actions could have a material adverse impact on Motorola’s
performance by making it difficult, more expensive or impossible for Motorola to make and/or import products
destined for the U.S. market that use certain infringing Qualcomm chipsets. While we continue to work with
Qualcomm and others on contingency plans relating to these cases, there is no guarantee that such plans will prove
successful or avoid further legal challenge.
Our future financial results may be negatively impacted if we are not successful in licensing our intellectual
property.
As part of the business strategy of some of our business segments, primarily our Mobile Devices business, we
generate revenue through the licensing of intellectual property rights. The licensed rights include those that are
essential to telecommunications standards, such as the GSM standard. Previously agreed-upon terms of some of
our long-standing license agreements and the aging of our essential patent portfolio have reduced our royalty
revenue over the past several years and are likely to continue to reduce that revenue. Uncertainty in the legal
environment makes it difficult to assure that we will be able to enter into new license agreements that will be
sufficient to offset that reduction in our revenue.
Many of our components and products are designed or manufactured by third parties and if third-party
manufacturers lack sufficient quality control or if there are significant changes in the financial or business
condition of such third-party manufacturers, it may have a material adverse effect on our business.
We rely on third-party suppliers for many of the components used in our products and we rely on third-party
manufacturers to manufacture many of our assemblies and finished products. If we are not able to engage such
manufacturers with the capabilities or capacities required by our business, or if such third parties lack sufficient
quality control or if there are significant changes in the financial or business condition of such third parties, it
could have a material adverse effect on our business.
We also have third-party arrangements for the design or manufacture of certain products, parts and
components. If we are not able to engage such parties with the capabilities or capacities required by our business,
or if these third parties fail to deliver quality products, parts and components on time and at reasonable prices, we
could have difficulties fulfilling our orders and our sales and profits could decline.
We may continue to make strategic acquisitions of other companies or businesses and these acquisitions introduce
significant risks and uncertainties, including risks related to integrating the acquired businesses and achieving
benefits from the acquisitions.
In order to position ourselves to take advantage of growth opportunities, we have made, and may continue to
make, strategic acquisitions that involve significant risks and uncertainties. These risks and uncertainties include:
(i) the difficulty in integrating newly-acquired businesses and operations in an efficient and effective manner;
(ii) the challenges in achieving strategic objectives, cost savings and other benefits from acquisitions; (iii) the risk
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