Motorola 2011 Annual Report Download - page 23

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Since our products are comprised of complex technology, much of which we acquire from suppliers through the
purchase of components or licensing of software, we are often involved in or impacted by assertions, including both
requests for licenses and litigation, regarding patent and other intellectual property rights. Third parties have
asserted, and in the future may assert, intellectual property infringement claims against us and against our customers
and suppliers. These assertions against us, and our customers and suppliers have been increasing as the complexity
of our products has increased. Many of these assertions are brought by non-practicing entities whose principle
business model is to secure patent licensing-based revenue from product manufacturing companies. The patent
holders often make broad and sweeping claims regarding the applicability of their patents to our products, seeking a
percentage of sales as licenses fees, seeking injunctions to pressure us into taking a license, or a combination thereof.
Defending claims may be expensive and divert the time and efforts of our management and employees. Increasingly,
third parties have sought broad injunctive relief which could limit our ability to sell our products in the U.S. or
elsewhere with intellectual property subject to the claims. If we do not succeed in any such litigation, we could be
required to expend significant resources to pay damages, develop non-infringing products or to obtain licenses to
the intellectual property that is the subject of such litigation, each of which could have a negative impact on our
financial results. However, we cannot be certain that any such licenses, if available at all, will be available to us on
commercially reasonable terms. In some cases, we might be forced to stop delivering certain products if we or our
customer or supplier are subject to a final injunction.
We attempt to negotiate favorable intellectual property indemnities with our suppliers for infringement of
third-party intellectual property rights. However, there is no assurance that we will be successful in our negotiations
or that a supplier’s indemnity will cover all damages and losses suffered by us and our customers due to the
infringing products or that a supplier will choose to accept a license or modify or replace its products with
non-infringing products which would otherwise mitigate such damages and losses. Further, we may not be able to
participate in intellectual property litigation involving a supplier and may not be able to influence any ultimate
resolution or outcome that may negatively impact our sales if a court enters an injunction that enjoins the supplier’s
products or if the International Trade Commission issues an exclusionary order that blocks our products from
importation into the U.S. The frequency with which intellectual property disputes involving our suppliers have
resulted in our involvement in International Trade Commission proceedings has increased. These proceedings are
costly and entail the risk that we will be subjected to a ban on the importation of our products into the U.S. solely
as a result of our use of a supplier’s components.
In addition, our customers increasingly demand that we indemnify them broadly from all damages and losses
resulting from intellectual property litigation against them.
Our patent and other intellectual property rights are important competitive tools and may generate income
under license agreements. We regard our intellectual property as proprietary and attempt to protect it 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 a negative impact on our financial results.
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. Further, competitors may be able to negotiate significantly more favorable terms
for licensed intellectual property than we are able to, which puts them at a competitive advantage. As our products
become more like commercial products, through the adoption of industry-standard technologies, for instance, our
intellectual property-related risks may increase.