The Company could be impacted by unfavorable results of legal proceedings, such as being found to have infringed on
intellectual property rights.
The Company is subject to various legal proceedings and claims that have not yet been fully resolved and that have
arisen in the ordinary course of business, and additional claims may arise in the future.
For example, technology companies, including many of the
Companys competitors, frequently enter into litigation based on allegations of patent infringement or other violations of intellectual property rights. In addition, patent holding companies seek to monetize patents they have purchased or
otherwise obtained. As the Company has grown, the intellectual property rights claims against it have increased and may continue to increase. In particular, the Companys cellular enabled products compete with products from mobile communication
and media device companies that hold significant patent portfolios, and the number of patent claims against the Company has significantly increased. The Company is vigorously defending infringement actions in courts in a number of U.S.
jurisdictions and before the U.S. International Trade Commission, as well as internationally in various countries. The plaintiffs in these actions frequently seek injunctions and substantial damages.
Regardless of the scope or validity of such patents or other intellectual property rights, or the merits of any claims by potential or actual
litigants, the Company may have to engage in protracted litigation. If the Company is found to infringe one or more patents or other intellectual property rights, regardless of whether it can develop non-infringing technology, it may be required to
pay substantial damages or royalties to a third-party, or it may be subject to a temporary or permanent injunction prohibiting the Company from marketing or selling certain products.
In certain cases, the Company may consider the desirability of entering into licensing agreements, although no assurance can be given that such licenses
can be obtained on acceptable terms or that litigation will not occur. These licenses may also significantly increase the Companys operating expenses.
Regardless of the merit of particular claims, litigation may be expensive, time-consuming, disruptive to the Companys operations and distracting to
management. In recognition of these considerations, the Company may enter into arrangements to settle litigation.
In managements opinion,
there is not at least a reasonable possibility the Company may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies, including matters related to infringement of intellectual property
rights. However, the outcome of litigation is inherently uncertain.
Although management considers the likelihood of such an outcome to be remote, if
one or more legal matters were resolved against the Company in a reporting period for amounts in excess of managements expectations, the Companys consolidated financial statements for that reporting period could be materially adversely
affected. Further, such an outcome could result in significant compensatory, punitive or trebled monetary damages, disgorgement of revenue or profits, remedial corporate measures or injunctive relief against the Company that could materially
adversely affect its financial condition and operating results.
The Company is subject to laws and regulations worldwide, changes to which could increase the
Companys costs and individually or in the aggregate adversely affect the Companys business.
The Company is subject to laws and
regulations affecting its domestic and international operations in a number of areas. These U.S. and foreign laws and regulations affect the Companys activities including, but not limited to, in areas of labor, advertising, digital
content, consumer protection, real estate, billing, e-commerce, promotions, quality of services, telecommunications, mobile communications and media, television, intellectual property ownership and infringement, tax, import and export requirements,
anti-corruption, foreign exchange controls and cash repatriation restrictions, data privacy requirements, anti-competition, environmental, health and safety.
By way of example, laws and regulations related to mobile communications and media devices in the many jurisdictions in which the Company operates are
extensive and subject to change. Such changes could include, among others, restrictions on the production, manufacture, distribution and use of devices, locking devices to a carriers network, or mandating the use of devices on more than one
carriers network. These devices are also subject to certification and regulation by governmental and standardization bodies, as well as by cellular network carriers for use on their networks. These certification processes are extensive
and time consuming, and could result in additional testing requirements, product modifications, or delays in product shipment dates, or could preclude the Company from selling certain products.
Compliance with these laws, regulations and similar requirements may be onerous and expensive, and they may be inconsistent from jurisdiction to
jurisdiction, further increasing the cost of compliance and doing business. Any such costs, which may rise in the future as a result of changes in these laws and regulations or in their interpretation, could individually or in the aggregate make the
Companys products and services less attractive to the Companys customers, delay the introduction of new products in one or more regions, or cause the Company to change or limit its business practices. The Company has implemented policies
and procedures designed to ensure compliance with applicable laws and regulations, but there can be no assurance that the Companys employees, contractors, or agents will not violate such laws and regulations or the Companys policies and
procedures.
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