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If we are unable to retain or hire key staff and skilled employees our business results may suffer.
Our success depends upon the continued contributions of our key staff and skilled employees, many of whom
would be extremely difficult to replace. Global competition for skilled employees in the data storage industry is
intense and, as we attempt to move to a position of technology leadership in the storage industry, our business success
becomes increasingly dependent on our ability to retain our key staff and skilled employees as well as attract, integrate
and retain new skilled employees. Volatility or lack of positive performance in our stock price and the overall markets
may adversely affect our ability to retain key staff or skilled employees who have received equity compensation. Addi-
tionally, because a substantial portion of our key employees' compensation is placed "at risk" and linked to the per-
formance of our business, when our operating results are negatively impacted by global economic conditions, we are at
a competitive disadvantage for retaining and hiring key staff and skilled employees versus other companies that pay a
relatively higher fixed salary. If we are unable to retain our existing key staff or skilled employees, or hire and
integrate new key staff or skilled employees, or if we fail to implement succession plans for our key staff, our operating
results would likely be harmed.
The nature of our industry and its reliance on intellectual property and other proprietary information subjects us and our
suppliers and customers to the risk of significant litigation.
The data storage industry has been characterized by significant litigation. This includes litigation relating to
patent and other intellectual property rights, product liability claims and other types of litigation. Litigation can be
expensive, lengthy and disruptive to normal business operations. Moreover, the results of litigation are inherently
uncertain and may result in adverse rulings or decisions. We may enter into settlements or be subject to judgments
that may, individually or in the aggregate, have a material adverse effect on our business, financial condition or
operating results. As disclosed in Part II, Item 8, Note 5 in the Notes to Consolidated Financial Statements included
in this Annual Report on Form 10-K on November 18, 2011, a sole arbitrator ruled against us in an arbitration in
Minnesota. The arbitration involves claims brought by Seagate Technology LLC against us and a now former employ-
ee, alleging misappropriation of confidential information and trade secrets. The arbitrator issued an interim award
against us in the amount of $525 million plus pre-award interest. On January 23, 2012, the arbitrator issued a final
award adding pre-award interest in the amount of $105.4 million, for a total award of $630.4 million. On January 23,
2012, we filed a petition in the District Court of Hennepin County, Minnesota to have the final arbitration award
vacated, and a hearing on the petition was held on March 1, 2012. On October 12, 2012, the District Court of
Hennepin County, Minnesota vacated, in full, the $630.4 million final arbitration award and ordered that a rehearing
be held concerning certain trade secret claims before a new arbitrator. On October 30, 2012, Seagate initiated an
appeal of the District Court's decision with the Minnesota Court of Appeals. Oral arguments in the appeal were held
on April 24, 2013. On July 22, 2013, the Minnesota Court of Appeals reversed the District Court's decision and
remanded for entry of an order and judgment confirming the arbitration award. We strongly disagree with the deci-
sion of the Court of Appeals, believe that the District Court's decision was correct, and will file a petition for review
with the Minnesota Supreme Court. If the Minnesota Supreme Court elects not to hear our petition for review or
affirms the Court of Appeals decision, the District Court is expected to enter an order and judgment confirming the
$630.4 million final arbitration award, plus post-award interest on the $525 million initial award at the statutory rate
of 10% from January 24, 2012. No judgment will be entered while we are petitioning the Minnesota Supreme Court.
We evaluate notices of alleged patent infringement and notices of patents from patent holders that we receive
from time to time. If claims or actions are asserted against us, we may be required to obtain a license or cross-license,
modify our existing technology or design a new non-infringing technology. Such licenses or design modifications can
be extremely costly. In addition, we may decide to settle a claim or action against us, which settlement could be cost-
ly. We may also be liable for any past infringement. If there is an adverse ruling against us in an infringement lawsuit,
an injunction could be issued barring production or sale of any infringing product. It could also result in a damage
award equal to a reasonable royalty or lost profits or, if there is a finding of willful infringement, treble damages. Any
of these results would increase our costs and harm our operating results. In addition, our suppliers and customers are
subject to similar risks of litigation, and a material, adverse ruling against a supplier or customer could negatively
impact our business.
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