1、TESSERA TECHNOLOGIES INCFORM 10-K(Annual Report)Filed 02/22/16 for the Period Ending 12/31/15 Address3025 ORCHARD PARKWAYSAN JOSE,CA 95134Telephone4083216000CIK0001261694SymbolTSRASIC Code3674-Semiconductors and Related DevicesIndustrySemiconductorsSectorTechnologyFiscal Year12/31http:/www.edgar- Co
2、pyright 2016,EDGAR Online,Inc.All Rights Reserved.Distribution and use of this document restricted under EDGAR Online,Inc.Terms of Use.UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,DC 20549 _FORM 10-K_(Mark One)x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT
3、 OF 1934For the fiscal year ended December 31,2015OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934Commission File Number:000-50460 _ TESSERA TECHNOLOGIES,INC.(Exact Name of Registrant as Specified in Its Charter)_ Delaware 16-1620029(State or Other Jurisdi
4、ction ofIncorporation or Organization)(I.R.S.EmployerIdentification No.)3025 Orchard Parkway,San Jose,California 95134(Address of Principal Executive Offices)(Zip Code)(408)321-6000(Registrants Telephone Number,Including Area Code)_Securities registered pursuant to Section 12(b)of the Act:Title of e
5、ach class Name of each exchange on which registeredCommon stock,par value$0.001 per share The NASDAQ Global Select MarketSecurities registered pursuant to Section 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act
6、.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Securities Exchange Act.Yes No Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Ac
7、t of 1934 during the preceding 12 months(or for such shorter period that the registrant wasrequired to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corpor
8、ate Web site,if any,every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during thepreceding 12 months(or for such shorter period that the registrant was required to submit and post such files).Yes No Indicate by check mark if disclosure of delinquen
9、t filers pursuant to Item 405 of Regulation S-K is not contained herein,and will not be contained,to the best of registrants knowledge,in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.Indicate by check mark whethe
10、r the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or a smaller reporting company.See the definitions of“large accelerated filer,”“accelerated filer”and“smallerreporting company”in Rule 12b-2 of the Exchange Act.(Check one):Large accelerated filer Accelerated
11、filer Non-accelerated filer (Do not check if a smaller reporting company)Smaller reporting company Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Securities Exchange Act).Yes No The aggregate market value of the registrants common stock held by non-a
12、ffiliates of the registrant as of June 30,2015 was$1,964,222,484(based on the closing sale price of the registrants common stock as reported on The NASDAQGlobal Select Market).The number of shares outstanding of the registrants common stock as of January 28,2016 was 50,305,378 DOCUMENTS INCORPORATED
13、 BY REFERENCE:Portions of the registrants Proxy Statement for the registrants 2016 Annual Meeting of Stockholders will be filed with the Commission within 120 days after the close of the registrants 2015 fiscal year and are incorporated byreference in Part III.Table of ContentsTESSERA TECHNOLOGIES,I
14、NC.ANNUAL REPORT ON FORM 10-KFOR THE YEAR ENDED DECEMBER 31,2015TABLE OF CONTENTS Page PART I Item 1.Business3Item 1A.Risk Factors8Item 1B.Unresolved Staff Comments22Item 2.Properties22Item 3.Legal Proceedings22Item 4.Mine Safety Disclosures24 PART II Item 5.Market for Registrants Common Equity,Rela
15、ted Stockholder Matters and Issuer Purchases of Equity Securities24Item 6.Selected Financial Data27Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations28Item 7A.Quantitative and Qualitative Disclosures About Market Risk39Item 8.Financial Statements and Suppleme
16、ntary Data40Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure43Item 9A.Controls and Procedures43Item 9B.Other Information44 PART III Item 10.Directors,Executive Officers and Corporate Governance44Item 11.Executive Compensation44Item 12.Security Ownership of
17、Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions,and Director Independence44Item 14.Principal Accountant Fees and Services44 PART IV Item 15.Exhibits and Financial Statement Schedules44 Signatures 2Table of ContentsCauti
18、onary Statement Regarding Forward-Looking StatementsThis Annual Report contains forward-looking statements,which are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of1995.Words such as“expects,”“anticipates,”“plans,”“believes,”“seeks,”“estimates,”“could
19、,”“would,”“may,”“intends,”“targets”and similarexpressions or variations of such words are intended to identify forward-looking statements,but are not the exclusive means of identifying forward-lookingstatements in this Annual Report.The identification of certain statements as“forward-looking”is not
20、intended to mean that other statements not specificallyidentified are not forward-looking.All statements other than statements about historical facts are statements that could be deemed forward-looking statements,including,but not limited to,statements that relate to our future revenues,product deve
21、lopment,demand,acceptance and market share,growth rate,competitiveness,gross margins,levels of research,development and other related costs,expenditures,the outcome or effects of and expenses related to litigationand administrative proceedings related to our patents,our intent to enforce our intelle
22、ctual property,our ability to license our intellectual property,tax expenses,cash flows,our ability to liquidate and recover the carrying value of our investments,our managements plans and objectives for our current and futureoperations,our plans for quarterly dividends and stock repurchases,the lev
23、els of customer spending or research and development activities,general economicconditions,and the sufficiency of financial resources to support future operations and capital expenditures.Although forward-looking statements in this Annual Report reflect the good faith judgment of our management,such
24、 statements can only be based on facts andfactors currently known by us.Consequently,forward-looking statements are inherently subject to risks,uncertainties,and changes in condition,significance,value and effect,including those discussed below under the heading“Risk Factors”within Part I,Item 1A of
25、 this Annual Report and other documents we file fromtime to time with the Securities and Exchange Commission(the“SEC”),such as our annual reports on Form 10-K,our quarterly reports on Form 10-Q and ourcurrent reports on Form 8-K.Such risks,uncertainties and changes in condition,significance,value an
26、d effect could cause our actual results to differ materiallyfrom those expressed herein and in ways not readily foreseeable.Readers are urged not to place undue reliance on these forward-looking statements,which speakonly as of the date of this Annual Report and are based on information currently an
27、d reasonably known to us.We undertake no obligation to revise or update anyforward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report.Readers are urged to carefully reviewand consider the various disclosures made in this Annual Report
28、,which attempt to advise interested parties of the risks and factors that may affect our business,financial condition,results of operations and prospects.Item 1.BusinessCorporate InformationOur principal executive offices are located at 3025 Orchard Parkway,San Jose,California 95134.Our telephone nu
29、mber is(408)321-6000.We maintain a websiteat .The reference to our website address does not constitute incorporation by reference of the information contained on this website.Tessera,the Tessera logo,FotoNation,the FotoNation logo,Ziptronix,the Ziptronix logo,DigitalAperture,FaceTools,FacePower,Foto
30、Savvy,IrisCam,LifeFocus,Invensas,the Invensas logo,xFD,FD,DFD,TFD,QFD,BVA,ZiBond and DBI are trademarks or registered trademarks of the Company or itsaffiliated companies in the U.S.and other countries.All other company,brand and product names may be trademarks or registered trademarks of their resp
31、ectivecompanies.In this Annual Report,the“Company,”“we,”“us”and“our”refer to Tessera Technologies,Inc.,which operates its business through its subsidiaries.Unlessspecified otherwise,the financial results in this Annual Report are those of the Company and its subsidiaries on a consolidated basis.Over
32、viewTessera Technologies,Inc.,including its Invensas,FotoNation and Ziptronix subsidiaries,licenses its technologies and intellectual property to customers for use inareas such as mobile computing and communications,memory and data storage,and 3-D Integrated Circuit(“3D-IC”)technologies,among others
33、.Ourtechnologies include semiconductor packaging and interconnect solutions,including xFD ,BVA ,ZiBond ,and DBI ,and products and solutions formobile and computational imaging,including our FaceTools ,FacePower ,FotoSavvy ,DigitalAperture TM,IrisCam ,LifeFocus ,face beautification,red-eye removal,Hi
34、gh Dynamic Range,autofocus,panorama,and image stabilization intellectual property.3Table of ContentsTessera,Inc.s research and development led to significant innovations in semiconductor packaging technology.Semiconductor packaging creates the mechanicaland electrical connection between semiconducto
35、r chips and systems such as computers and communication equipment,often via connection to printed circuitboards.We patented these innovations,often referred to as chip-scale packaging,which were widely adopted in the electronics industry.The wave of adoption wasinitially led by Intel Corporation,and
36、 over time,many semiconductor companies and outsourced assembly and test companies adopted the technology and enteredinto license agreements with Tessera,Inc.Invensas Corporation,founded in 2011,is a wholly owned subsidiary of Tessera Technologies,Inc.that develops novel semiconductor packaging and
37、interconnecttechnologies for memory,mobile,computing and smart object applications.For these applications,Invensas innovates in three primary areas:(i)DRAM and Flashmemory,(ii)mobile processors,and(iii)3D-IC assemblies.Invensas engineering teams develop and prototype these technologies in extensive
38、assembly and testlaboratories,as well as performing full product reliability testing and acceptance testing.By building collaborative partnerships with world-class manufacturingcompanies and high-volume equipment and materials suppliers,Invensas then licenses these technology solutions to original e
39、quipment manufacturers(OEMs),original design manufacturers(ODMs),integrated device manufacturers(IDMs),and outsourced assembly and test(OSATs)providers,and supports thetechnology transfer at the customer-designated sites.Within each of these three Invensas sub-portfolios(memory,mobile,and 3D-IC),Inv
40、ensas has created specific product solutions that address critical needs in themarket.For example,Invensas innovates in the 3D-IC space.3D-IC,which includes Through-Silicon Vias,is widely expected to be the next major inflection insemiconductor packaging and is applicable to multiple markets,includi
41、ng networking,data storage,computing and mobility.In August of 2015,we augmented our3D-IC portfolio with the acquisition of Ziptronix,Inc.,a leading developer of emerging low temperature wafer bonding technologies,which are targeted at theimage sensors,DRAM,MEMS,RF and 2.5D logic markets.BVA(Bond Vi
42、a Array),one of the Invensas mobile packaging solutions,addresses the need for smallform factor,high bandwidth,low power and low cost in mobile devices,and Invensas with its partners is working to complete technology qualification to supportmass adoption.Finally,xFD,an Invensas multi-chip DRAM techn
43、ology,was designed to provide some of the benefits of 3D-IC DRAM by connecting multiplesingle-chip DRAMs,and it has gained interest with OEMs and DRAM manufacturers.FotoNation Limited,which is comprised of world-class image scientists as well as software and hardware engineers,continues to innovate
44、in product and system-level imaging technologies.FotoNation licenses its software solutions and technologies for mobile imaging,includingthe following solutions:FaceTools provides face-oriented imaging technology such as face detection and tracking,smile and blink detection,red-eye removal,face reco
45、gnition,and face beautification.Implementing these algorithms using our hardware acceleration technology results in enhanced performance for both video andstill images and sharply reduced power requirements.Face beautification enables users to enhance portraits(still and video)automatically with fea
46、tures such as skin toning,face slimming,eye brightening,andteeth whitening.FotoSavvy is a solution that assists and guides smartphone camera users who are untrained in photography to produce professional-quality,DSLR-likepictures from the camera-phone.FacePower enables the camera of a smartphone to
47、act as a low-power sensor,reducing battery power consumption in the sensor by processing the imagesusing sophisticated,computational analysis.It saves additional power by switching on only when a user looks at the screen.In addition,high-dynamicrange(HDR)capabilities enable users to capture quality
48、images across a wide range of lighting conditions,including bright lights or sunshine.Panorama enables users to create panoramic images easily and automatically in a single step without need for a PC or editing software.Image stabilization corrects for motion blur and shake induced during video capt
49、ure.In addition to providing technology and solutions to the mobile phone market,FotoNation provides best in class hardware-accelerated imaging/vision solutionstargeted to other emerging markets including biometrics,automotive,surveillance and smart objects(electronic objects that respond to their e
50、xternal environment).Our operations underwent many changes during 2013 and 2014.The following restructuring and other activities have occurred:In 2013,we sold our Micro-Optics business based in Charlotte,North Carolina.Originally purchased in 2006,this business focused on diffractiveoptical elements
51、,refractive optical elements,and integrated micro-optic sub-assemblies.All4Table of Contentsassets of this business were sold during the 2013 sale except for the related land and building and certain fabrication assets.We retained those assets and leasedthem to the buyer until they were sold in Augu
52、st of 2014.In 2013,we closed our leased manufacturing facility in Zhuhai,China(the Zhuhai Facility)and consolidated our manufacturing capabilities intoTaiwan.By closing the Zhuhai Facility,our strategy was to no longer supply the whole camera module.Our primary focus was developing the mems|cam actu
53、ator,the imaging software and user applications,and manufacturing and supplying only the lens barrel.As a result of this closure,certain assets in the Zhuhai Facilitywere considered impaired or written off entirely.The assets of this facility were either sold or transferred to our mems|cam manufactu
54、ring operations in Taiwan.In January 2014,we announced the cessation of all mems|cam manufacturing operations.As part of these efforts,we are no longer operating facilities inArcadia,California,Rochester,New York,Hsinchu,Taiwan and Japan.As a result of these actions,certain assets were impaired or w
55、ere written off entirely andrestructuring and other charges were taken in 2013 and the first half of 2014.All material assets of these operations were sold or licensed to a third party inDecember 2014.In this document,the operations and financial results of these operations are considered discontinu
56、ed operations.For further discussion of these transactions,seeNote 6-Discontinued Operations,Note 9-Goodwill and Identified Intangible Assets and Note 16-Restructuring,Impairment of Long-Lived Assets andOther Charges and Gain on Sale of Patents in the Notes to Consolidated Financial Statements.As a
57、result of the actions noted above,during the first quarter of 2014,we determined that we operate our business in one operating segment,focused on themonetization of intellectual property,both internally developed and acquired,through royalties,licenses and other means.Previously,we operated in two o
58、peratingsegments-Intellectual Property and DigitalOptics.All financial results and discussions below relate to continuing operations unless otherwise specified andconform to our determination that we now operate in a single operating segment.CustomersOur technologies have been licensed to more than
59、100 companies.These customers include Intel Corporation,LG Electronics,Micron Technology,Inc.,SamsungElectronics Co.Ltd,Shenzhen O-Film Tech Co.,LTD,SK hynix Inc.and Sony Corporation,among others.Sales and MarketingOur sales activities focus primarily on developing direct relationships at the techni
60、cal,marketing and executive management levels.Product marketing focuses onidentifying the needs and product requirements of our customers.Product marketing also manages the development of all of our technologies throughout thedevelopment cycle and creates the required marketing materials to assist w
61、ith the adoption of the technologies.Research&DevelopmentOur research and development groups work closely with our sales and marketing groups,as well as our customers and partners,to bring our technologies to marketin a timely,high-quality and cost efficient manner.As of December 31,2015,we employed
62、 180 engineers and technologists devoted to semiconductor packaging,other semiconductor technologies and imaging technologies.Research and development and other related costs totaled approximately$32.2 million,$32.3 millionand$28.1 million for the years ended December 31,2015,2014 and 2013,respectiv
63、ely.Intellectual Property PortfolioAs of December 31,2015,we owned approximately 4,036 patents and patent applications,comprised of approximately2,255 United States patents and patent applications and approximately 1,781 foreign patents and patent applications.The expiration dates of our issued pate
64、ntsrange from 2016 to 2034.We evaluate intellectual property portfolios for purchase in the fields of advanced semiconductor packaging,circuity technologies,and related fields.Ourevaluation criteria for patent acquisitions include,for example:the sales and profitability of the relevant products,our
65、view of the prospects of the market for therelevant products,size of the portfolio,legal criteria and our assessment of the likelihood of obtaining negotiated licenses.5Table of ContentsStrategyOur strategy consists primarily of two initiatives:licensing our semiconductor packaging,circuitry,and int
66、erconnect technologies from Invensas and our Tessera,Inc.subsidiary to semiconductorcompanies and OSATs.licensing our FotoNation image processing products to OEMs and platform providers.For our semiconductor business,we invest in the development of new advanced packaging and interconnect technologie
67、s to enable the next generation of mobile,consumer and computing products.Leveraging our extensive design,simulation and prototyping capability,we partner with leaders throughout the semiconductorecosystem to develop,demonstrate,optimize and commercialize our technologies.As a component of our comme
68、rcialization effort,we transfer our technologies tocustomer-selected manufacturing sites and OSATs.In addition,we have developed significant capabilities in the technical analysis of intellectual property and its embodiment in commercial products.We generallyencourage customers to broaden their adop
69、tion of(and license to)our array of innovative technologies in conjunction with licensing patented technologies from us.To increase the likelihood that our technologies are adopted,we lead with technology and then seek to negotiate reasonable royalties for our patented inventions.Successful negotiat
70、ion of these royalties is generally dependent onExplaining the benefits of new technology,including any size,power and performance benefits;Explaining the value proposition over existing or alternative technologies;Explaining the manufacturability of the technologies;Countering bias against external
71、ly developed solutions;andProviding technical and market data supporting the royalties we are seeking.Although we are engaged with and have licensed our technologies to many semiconductor companies,some of the companies that use our patented technologieshave nonetheless chosen not to enter into lice
72、nse agreements with us.Consequently,we have necessarily developed significant abilities to plan,to execute,and tosustain litigation activities.We view litigation as a tool to be used only when necessary and only when other business approaches have failed.Although we havesettled a substantial majorit
73、y of our outstanding litigation over the past several years,if we are unable to secure license agreements on favorable terms throughnegotiations,we might have to file new litigation to enforce our rights.See Part 1,Item 3-Legal Proceedings.We believe that holding a significant cash and cashequivalen
74、ts position is essential to maintaining the credibility of our litigation capabilities.In our FotoNation image processing business,we have ongoing investment in world-class R&D supported by strong relationships with key OEMs and platformproviders in consumer electronics.We have an assortment of powe
75、rful products and technologies,which we demonstrate to prospective customers to develop theirinterest in licensing those offerings from us.By combining proprietary hardware design with software development,we aim to offer advantages in both processingspeed and low power,providing distinctive feature
76、s to battery-powered devices,such as smartphones.We license our hardware designs to customers who,in turn,typically embed the hardware as modules within a larger chip.Our software typically runs on a microprocessor with capabilities that are augmented by ourhardware within a customers system.Image p
77、rocessing integrates several advanced engineering and scientific disciplines,and the resulting products are of interest in a broad variety of applicationdomains,ranging from cellphones to automotive,biometrics,photography,drones,robotics,and others.As such,we continue our ongoing development of stro
78、ngtechnical and business relationships with both current and prospective customers across these diverse industries.Those customer relationships provide not only asource of ongoing and growing revenue but also insights into industry trends that help us build desirable products.We are aggressive in co
79、ntinuing to invent newtechnologies for image processing and object recognition,while staying apprised of potentially relevant technical advances from elsewhere.CompetitionWe compete with internal design groups at semiconductor manufacturers,assemblers,and electronic component and system manufacturer
80、s,who may create theirown packaging solutions that compete with our technologies that we license.We also face a form of competition known as royalty stacking.Royalty stackingrefers to situations in which a single product potentially infringes on many patents,and thus may bear multiple royalty burden
81、s.Our customers willingness andability to pay reasonable royalties is,in part,affected by the number of patents infringed by a particular customer product,the concentration of the holders of thosepatents,the customers cost of licensing those patents,and the profitability of the infringing product.We
82、6Table of Contentsalso compete with other firms in acquiring patent portfolios or partnering with owners of patent portfolios.The key competitive factors include financial resourcesand willingness to pay,experience in patent licensing,reputation as a licensor,litigation history,and licensing strateg
83、y for the subject portfolio.The FotoNation image processing technologies such as Face Detection and our other imaging products compete with other image processing software vendors suchas ArcSoft,Inc.as well as internal design groups of our customers providing similar technologies by employing differ
84、ent approaches.We also expect to see othercompeting technologies emerge.EmployeesAs of December 31,2015,we had 264 employees,with 180 in research and development(including employees who perform engineering,assembly and designservices under our service agreements with third parties)and 44 in general
85、administration,including general management,legal,human resources,informationtechnology,finance and accounting,and 40 in sales,marketing and licensing.We have never had a work stoppage among our employees and no personnel arerepresented under collective bargaining agreements.We consider relations wi
86、th our employees to be good.Customer ConcentrationAll of our revenues are denominated in U.S.dollars.The following table sets forth revenues generated from customers comprising 10%or more of total revenuesfor the periods indicated:Years EndedDecember 31,2015 2014 2013Samsung Electronics 19%24%11%Mic
87、ron Technology,Inc.15%*%*%Amkor Technology,Inc.14%*%*%SK hynix Inc.13%11%26%Powertech Technology Inc.*%34%*%Sony Corporation*%*%18%*denotes less than 10%of total revenues.A significant portion of our revenues are derived from customers headquartered outside of the U.S.,principally in Asia,and we exp
88、ect these revenues will continueto account for a significant portion of total revenues in future periods.The table below lists the geographic regions of the headquarters of our customers and thepercentage of revenues derived from each region for the periods indicated:Years EndedDecember 31,2015 2014
89、 2013Taiwan 21%36%2%Korea 32%35%37%U.S.36%14%25%Japan 3%4%29%Other Asia 6%10%6%Europe and other 2%1%1%See Note 15“Segment and Geographic Information”in the Notes to Consolidated Financial Statements for additional geographic information about ourrevenues and long-lived assets.The international natur
90、e of our business exposes us to a number of risks,including,but not limited to:laws and business practices favoring local companies;increased tax rates and withholding tax obligations on license revenues in non-U.S.jurisdictions that we may not be able to offset fully against our U.S.tax obligations
91、;difficulties in enforcing U.S.judgments and orders against foreign persons and products made overseas;and7Table of Contents less effective protection of intellectual property than is afforded in the U.S.or other developed countries.Available InformationOur Internet address is where we make availabl
92、e,free of charge,our annual report on Form 10-K,quarterly reports on Form 10-Q,currentreports on Form 8-K and any amendments to those reports,as soon as reasonably practicable after we electronically file such material with,or furnish it to,theSEC.Our SEC reports can be accessed through the investor
93、 relations section of our website.The information found on our website is not incorporated into this orany other report we file with or furnish to the SEC.Item 1A.Risk FactorsOur operations and financial results are subject to various risks and uncertainties,including those described below,that coul
94、d adversely affect our business,financial condition,results of operations,cash flows,and the trading price of our common stock.Our revenues are concentrated in a limited number of customers and if we lose any of these customers,or these customers do not pay us,our revenuescould decrease substantiall
95、y.We earn a significant amount of our revenues from a limited number of customers.For the years ended December 31,2015,2014 and 2013,there were four,threeand three customers,respectively,that each accounted for 10%or more of total revenues.We expect that a significant portion of our revenues will co
96、ntinue tocome from a limited number of customers for the foreseeable future.If we lose any of these customers,or these customers do not pay us,our revenues coulddecrease substantially.In addition,a significant portion of our recurring revenue is the result of structured payment terms in connection w
97、ith the settlement oflitigation matters,including our settlements with Amkor Technology,Inc.and Powertech Technology Inc.If we are unable to replace the revenue from an expiringlicense or at the end of structured payment terms of a settlement agreement with similar revenue from other customers,our r
98、oyalty revenue could be adverselyimpacted as compared to periods prior to such expiration or the end of such payment terms.From time to time we enter into license agreements that have fixed expiration dates and if,upon expiration or termination,we are unable to renew orrelicense such license agreeme
99、nts on terms favorable to us,our results of operations could be harmed.From time to time we enter into license agreements that have fixed expiration dates.Upon expiration of such agreements we need to renew or replace theseagreements in order to maintain our revenue base.If we are unable to replace
100、the revenue from an expiring license with similar revenue from other customers,ourroyalty revenue could be adversely impacted as compared to periods prior to such expiration.Furthermore,we may not be able to continue licensing customers on terms favorable to us,under the existing terms or at all,whi
101、ch would harm our results ofoperations.While we have expanded our licensable technology portfolio through internal development and technologies and patents purchased from third parties,there is no guarantee that these measures will lead to continued royalties.If we fail to continue to do business wi
102、th our current licensees,our business would bematerially adversely affected.The success of our licensing business is dependent on the quality of our patent portfolios and our ability to create and implement new technologies orexpand our licensable technology portfolio through acquisitions.We derive
103、a significant portion of our revenues from licenses and royalties including structured settlement payments.The success of our licensing businessdepends on our ability to continue to develop and acquire high quality patent portfolios.We devote significant resources to developing new technologies and
104、tosourcing and acquiring patent portfolios to address the evolving needs of the semiconductor and the consumer and communication electronics industries and wemust continue to do so in the future to remain competitive.Developments in our technologies are inherently complex,and require long developmen
105、t cycles and asubstantial investment before we can determine their commercial viability.Moreover,competition for acquiring high quality patent portfolios is intense and thereis no assurance that we can continue to acquire such patent portfolios on favorable terms.We may not be able to develop and ma
106、rket new or improved technologiesin a timely or commercially acceptable fashion.Furthermore,our acquired and developed patents will expire in the future.Our current U.S.issued patents expire atvarious times through 2034.We need to develop or acquire successful innovations and obtain revenue-generati
107、ng patents on those innovations before our currentpatents expire,and our failure to do so would significantly harm our business,financial position,results of operations and cash flows.8Table of ContentsWe have in the past and may in the future be involved in litigation and administrative proceedings
108、 involving some of our key patents;any invalidation orlimitation of the scope of our key patents could significantly harm our business.We have been in the past and may in the future be involved in litigation involving some of our patents.The parties in these legal actions often challenge thevalidity
109、,scope,enforceability and ownership of our patents.In addition,in the past requests for reexamination or review have been filed in the U.S.Patent andTrademark Office(PTO)with respect to patent claims that were at issue in one or more of our litigation proceedings,and oppositions have been filed agai
110、nst uswith respect to our patents in the European Patent Office(EPO).During a reexamination or review proceeding and upon completion of the proceeding,the PTOor EPO may leave a patent in its present form,narrow the scope of the patent,or cancel some or all of the claims of the patent.For example the
111、 PTO has issuedseveral Official Actions rejecting or maintaining earlier rejections of many of the claims in some of our patents.From time to time we assert these patents andpatent claims in litigation and administrative proceedings.If the PTOs adverse rulings are upheld on appeal and some or all of
112、 the claims of the patents that aresubject to reexamination are canceled,our business may be significantly harmed.In addition,counterparties to our litigation and administrative proceedings mayseek and obtain orders to stay these proceedings based on rejections of claims in PTO reexaminations or rev
113、iew proceedings,and other courts or tribunalsreviewing our legal actions could make findings adverse to our interests,even if the PTO actions are not final.We cannot predict the outcome of any of these proceedings or the myriad procedural and substantive motions in these proceedings.If there is an a
114、dverse ruling inany legal or administrative proceeding relating to the infringement,validity,enforceability or ownership of any of our patents,or if a court or an administrativebody such as the PTO limits the scope of the claims of any of our patents or concludes that they are unpatentable,we could
115、be prevented from enforcing or earningfuture revenues from those patents,and the likelihood that customers will take new licenses and that current licensees will continue to agree to pay under theirexisting licenses could be significantly reduced.The resulting reduction in license fees and royalties
116、 could significantly harm our business,consolidated financialposition,results of operations and cash flows,as well as the trading price of our common stock.Furthermore,regardless of the merits of any claim,the continued maintenance of these legal and administrative proceedings may result in substant
117、ial legalexpenses and diverts our managements time and attention away from our other business operations,which could significantly harm our business.Our enforcementproceedings have historically been protracted and complex.The time to resolution and complexity of our litigation,its disproportionate i
118、mportance to our businesscompared to other companies,the propensity for delay in civil litigation,and the potential that we may lose particular motions as well as the overall litigation couldall cause significant volatility in our stock price and have a material adverse effect on our business and co
119、nsolidated financial position,results of operations,andcash flows.The timing of payments under our license and settlement agreements may cause fluctuations in our quarterly or annual results of operations.From time to time we enter into license and settlement agreements that include pricing or payme
120、nt terms that result in quarter-to-quarter or year-over-yearfluctuations in our revenues,such as volume pricing adjustments.The effect of these terms may also cause our aggregate annual royalty revenues to grow lessrapidly than annual growth in overall unit shipments in the applicable end market.Add
121、itionally,our customers may fail to pay,delay payment of or underpay whatthey owe to us under our license and settlement agreements,which may in turn require us to enforce our contractual rights through litigation,resulting in paymentamounts and timing different than expected based on the terms of o
122、ur license and settlement agreements.This also may cause our revenues to fluctuate on aquarter-to-quarter or year-over-year basis.Recent and proposed changes to U.S.patent laws,rules,and regulations may adversely impact our business.Our business relies in part on the uniform and historically consist
123、ent application of U.S.patent laws,rules and regulations.There have been numerous recentadministrative,legislative,and judicial changes and proposed changes to patent laws and rules that may have a significant impact on our ability to protect ourtechnology and enforce our intellectual property right
124、s.For example,we expect that Congress may consider bills relating to patent reform that could adverselyimpact our business depending on the scope of any bills that may ultimately be enacted into law.As another example,the U.S.Supreme Court and lower courtshave in recent years issued decisions that a
125、re not favorable to patent owners.Some of these changes or potential changes may not be advantageous for us,and maymake it more difficult to obtain adequate patent protection,or to enforce our patents against parties using them without a license or payment of royalties.Thesechanges or potential chan
126、ges could increase the costs and uncertainties surrounding the prosecution of our patent applications and the enforcement of our patentrights,and could have a deleterious effect on our ability to license our patents and,therefore,on the royalties we can collect.Some of our license agreements may con
127、vert to fully paid-up licenses at the expiration of their terms,or upon certain milestones,and we may not receiveroyalties after that time.9Table of ContentsFrom time to time we enter into license agreements that automatically convert to fully paid-up licenses upon expiration or upon reaching certai
128、n milestones.Forexample,Tessera,Inc.s license agreement with Texas Instruments,Inc.automatically converted to a fully paid-up license on December 31,2013,assuming thatTexas Instruments complied with all terms and conditions of the license agreement up through its expiration.We may not receive furthe
129、r royalties from licenseesfor any licensed technology under those agreements if they convert to fully paid-up licenses because such licensees will be entitled to continue using some,if notall,of the relevant intellectual property or technology under the terms of the license agreements without furthe
130、r payment,even if relevant patents or technologiesare still in effect.If we cannot find another source of revenue to replace the revenues from these license agreements converting to fully paid-up licenses,our resultsof operations following such conversion would be materially adversely affected.A sig
131、nificant amount of our royalty revenues comes from a few end markets and products,and our business could be harmed if demand for these marketsegments or products declines.A significant portion of our royalty revenues comes from the manufacture and sale of packaged semiconductor chips for DRAM,applic
132、ation-specific standardproduct semiconductors,application-specific integrated circuits and memory.In addition,we derive substantial revenues from the incorporation of our technologyinto mobile devices,consumer products and computer hardware.If demand for semiconductors in any one or a combination of
133、 these market segments or productsdeclines,our royalty revenues will be reduced significantly and our business would be harmed.The long-term success of our business is dependent on a royalty-based business model,which is inherently risky.The long-term success of our business is dependent on future r
134、oyalties paid to us by licensees.Royalty payments under our licenses may be based,among otherthings,upon the number of electrical connections to the semiconductor chip in a package covered by our licensed technology,a percent of net sales,a rate perpackage,a per unit sold basis or a fixed quarterly
135、amount.We are dependent upon our ability to structure,negotiate and enforce agreements for the determinationand payment of royalties,as well as upon our licensees compliance with their agreements.We face risks inherent in a royalty-based business model,many ofwhich are outside of our control,such as
136、 the following:*the rate of adoption and incorporation of our technology by semiconductor manufacturers,and assemblers,manufacturers of consumer andcommunication electronics,and the automotive and surveillance industry;*the willingness and ability of materials and equipment suppliers to produce mate
137、rials and equipment that support our licensed technology,in aquantity sufficient to enable volume manufacturing;*the ability of our licensees to purchase such materials and equipment on a cost-effective and timely basis;*the length of the design cycle and the ability of us and our customers to succe
138、ssfully integrate certain of our FotoNation technologies into theirintegrated circuits;*the demand for products incorporating semiconductors that use our licensed technology;*the cyclicality of supply and demand for products using our licensed technology;*the impact of economic downturns;and*the tim
139、ing of receipt of royalty reports may not meet our revenue recognition criteria resulting in fluctuation in our results of operations.It is difficult for us to verify royalty amounts owed to us under our licensing agreements,and this may cause us to lose revenues.10Table of ContentsThe terms of our
140、license agreements often require our licensees to document their use of our technology and report related data to us on a quarterly basis.Althoughour license terms generally give us the right to audit books and records of our licensees to verify this information,audits can be expensive,time consumin
141、g,andmay not be cost justified based on our understanding of our licensees businesses,especially given the international nature of our licensees.Our license complianceprogram audits certain licensees to review the accuracy of the information contained in their royalty reports in an effort to decreas
142、e the likelihood that we will notreceive the royalty revenues to which we are entitled under the terms of our license agreements,but we cannot give assurances that such audits will be effective tothat end.The markets for semiconductors and related products are highly concentrated,and we may have lim
143、ited opportunities to license our technologies or sellour products.The semiconductor industry is highly concentrated in that a small number of semiconductor designers and manufacturers account for a substantial portion of thepurchases of semiconductor products generally,including our products and pr
144、oducts incorporating our technologies.Continued consolidation in the semiconductorindustry may increase this concentration.Accordingly,we expect that licenses of our technologies and sales of our products will be concentrated with a limitednumber of customers for the foreseeable future.As we acquire
145、 new technologies and integrate them into our product line,we will need to establish newrelationships to sell these products.Our financial results significantly depend on our success in establishing and maintaining relationships with,and effectingsubstantial sales to,these customers.Even if we are s
146、uccessful in establishing and maintaining such relationships,our financial results will be dependent in largepart on these customers sales and business results.We make significant investments in new products and services that may not achieve technological feasibility or profitability or that may lim
147、it our revenuegrowth.We have made and will continue to make significant investments in research,development,and marketing of new technologies,products and services,includingadvanced semiconductor packaging.Investments in new technologies are speculative and technological feasibility may not be achie
148、ved.Commercial successdepends on many factors including demand for innovative technology,availability of materials and equipment,selling price the market is willing to bear,competition and effective licensing or product sales.We may not achieve significant revenues from new product and service inves
149、tments for a number of years,ifat all.Moreover,new technologies,products and services may not be profitable,and even if they are profitable,operating margins for new products and businessesmay not be as high as the margins we have experienced historically or originally anticipated.For example,in Jan
150、uary 2014 we announced that we were ceasing allmanufacturing efforts for our MEMS-based autofocus technologies.In conjunction with this decision,we undertook a workforce reduction of over 300 employeesand we have closed or transferred to third parties our facilities in Arcadia,California,Rochester,N
151、ew York,Japan and Hsinchu,Taiwan.We incurred impairmentand other charges in the fourth quarter of 2013 and the first half of 2014 related to restructuring,impairment and other charges.We expect to continue to be involved in material legal proceedings in the future to enforce or protect our intellect
152、ual property and contract rights,including material litigation with existing licensees or strategic partners,which could harm our business.From time to time,our efforts to obtain a reasonable royalty through our sales efforts do not result in the prospective customer agreeing to license our patents
153、orour technology.In certain cases,we use litigation to defend our patent rights,to seek payment for past infringement,and to seek future royalties for the use of ourpatents and technology.We also may litigate to enforce our other intellectual property rights,to enforce the terms of our license agree
154、ments,to protect our tradesecrets,to determine the validity and scope of the proprietary rights of others,and to defend against claims of infringement or invalidity.Our current legal actions,as described in Part I,Item 3-Legal Proceedings,are examples of disputes and litigation that impact our busin
155、ess.If we are not able to reach agreement withcustomers or potential customers we may be involved in similar legal proceedings in the future,including proceedings to ensure proper and full payment ofroyalties by licensees under the terms of their license agreements.These existing and any future lega
156、l actions may harm our business.For example,legal actions could cause an existing licensee or strategic partner to cease makingroyalty or other payments to us,or to challenge the validity and enforceability of our patents or the scope of our license agreements,and could significantly damageour relat
157、ionship with such licensee or strategic partner and,as a result,prevent the adoption of our technologies and intellectual property by such licensee orstrategic partner.Litigation could also severely disrupt or shut down the business operations of our licensees or strategic partners,which in turn wou
158、ld significantlyharm our ongoing relations with them and cause us to lose royalty revenues.Moreover,the timing and results of any of our legal proceedings are not predictableand may vary in any individual proceeding.11Table of ContentsFrom time to time we identify products that we believe infringe o
159、ur patents.We seek to license the companies that design,make,use,import,or sell those productsbut sometimes those companies are unwilling to enter into a license agreement.In those circumstances,we may elect to enforce our patent rights against thoseproducts.Litigation stemming from these or other d
160、isputes could harm our relationships with other licensees or our ability to gain new customers,who maypostpone licensing decisions pending the outcome of the litigation or dispute,or who may,as a result of such litigation,choose not to adopt our technologies.Inaddition,these legal proceedings could
161、be very expensive and may significantly reduce our profits.The costs associated with legal proceedings are typically high,relatively unpredictable and not completely within our control.These costs may be materially higherthan expected,which could adversely affect our operating results and lead to vo
162、latility in the price of our common stock.Whether or not determined in our favor orultimately settled,litigation diverts our managerial,technical,legal and financial resources from our business operations.Furthermore,an adverse decision in anyof these legal actions could result in a loss of our prop
163、rietary rights,subject us to significant liabilities,require us to seek licenses from others,limit the value of ourlicensed technology or otherwise negatively impact our stock price or our business and consolidated financial position,results of operations and cash flows.Even if we prevail in our leg
164、al actions,significant contingencies may exist to their settlement and final resolution,including the scope of the liability of each party,our ability to enforce judgments against the parties,the ability and willingness of the parties to make any payments owed or agreed upon,and the dismissal of the
165、legal action by the relevant court,none of which are completely within our control.Parties that may be obligated to pay us royalties or damages could becomeinsolvent or decide to alter their business activities or corporate structure,which could affect our ability to collect royalties or damages fro
166、m,or enforce a judgmentagainst,such parties.Competing technologies may harm our business.We expect that our technologies will continue to compete with technologies of internal design groups at semiconductor manufacturers,assemblers,electroniccomponent and system manufacturers.The internal design gro
167、ups of these companies create their own packaging and imaging solutions.If these internal designgroups design around our patents or introduce unique solutions superior to our technology,they may not need to license our technology.These groups may designtechnology that is less expensive to implement
168、or that enables products with higher performance or additional features.Many of these groups have substantiallygreater resources,greater financial strength and lower cost structures which may allow them to undercut our price.They also have the inherent advantage of accessto internal corporate strate
169、gies,technology roadmaps and technical information.As a result,they may be able to bring alternative solutions to market more easilyand quickly.For our embedded image processing technologies such as Face Detection and our other FaceTools products,our offerings compete with other image processingsoft
170、ware vendors such as ArcSoft,Inc.as well as internal design groups of our customers providing similar technologies by employing different approaches.In the future,our licensed technologies may also compete with other technologies that emerge.These technologies may be less expensive and provide highe
171、r oradditional performance.Companies with these competing technologies may also have greater resources.Technological change could render our technologiesobsolete,and new,competitive technologies could emerge that achieve broad adoption and adversely affect the use of our technologies and intellectua
172、l property.If we do not successfully further develop and commercialize the technologies we acquire,or cultivate strategic relationships that expand our licensableportfolio,our competitive position could be harmed and our operating results adversely affected.We also attempt to expand our licensable t
173、echnology portfolio and technical expertise by further developing and acquiring new technologies or developingstrategic relationships with others.These strategic relationships may include the right for us to sublicense technology and intellectual property to others.However,we may not be able to acqu
174、ire or obtain rights to licensable technology and intellectual property in a timely manner or upon commercially reasonable terms.Evenif we do acquire such rights,some of the technologies we invest in may be commercially unproven and may not be adopted or accepted by the industry.Moreover,our researc
175、h and development efforts,and acquisitions and strategic relationships,may be futile if we do not accurately predict the future needs of thesemiconductor,consumer and communication electronics,and consumer imaging industries.Our failure to acquire new technologies that are commercially viablein the
176、semiconductor,consumer and communication electronics,and consumer imaging industries could significantly harm our business,financial position,resultsof operations and cash flows.The way we integrate internally developed and acquired technologies into our products and licensing programs may not be ac
177、cepted by customers.12Table of ContentsWe have devoted,and expect to continue to devote,considerable time and resources to developing,acquiring and integrating new and existing technologies intoour products and licensing programs.However,if customers do not accept the way we have integrated our tech
178、nologies,they may adopt competing solutions.Inaddition,as we introduce new products or licensing programs,we cannot predict with certainty if and when our customers will transition to those new products orlicensing programs.Moreover,with respect to certain of our FotoNation technologies,even after w
179、e have signed a license agreement with a customer,we willoften not see significant revenue from that customer until after such technologies have been successfully designed into the customers integrated circuits,which cantake 18 months or longer.If customers fail to accept new or upgraded products or
180、 licensing programs incorporating our technologies,our financial position,resultsof operations and cash flows could be adversely impacted.If we fail to protect and enforce our intellectual property rights and our confidential information,our business will suffer.We rely primarily on a combination of
181、 license,development and nondisclosure agreements and other contractual provisions and patent,trademark,trade secret andcopyright laws to protect our technology and intellectual property.If we fail to protect our technology and intellectual property,our licensees and others may seekto use our techno
182、logy and intellectual property without the payment of license fees and royalties,which could weaken our competitive position,reduce ouroperating results and increase the likelihood of costly litigation.The growth of our business depends in large part on our ability to obtain intellectual propertyrig
183、hts in a timely manner,our ability to convince third parties of the applicability of our intellectual property rights to their products,and our ability to enforce ourintellectual property rights.In certain instances,we attempt to obtain patent protection for portions of our technology,and our licens
184、e agreements typically include both issued patents andpending patent applications.If we fail to obtain patents in a timely manner or if the patents issued to us do not cover all of the inventions disclosed in our patentapplications,others could use portions of our technology and intellectual propert
185、y without the payment of license fees and royalties.For example,our business maysuffer if we are unable to obtain patent protection in a timely manner from the PTO due to processing delays resulting from examiner turnover and a continuingbacklog of patent applications.We also rely on trade secret la
186、ws rather than patent laws to protect other portions of our proprietary technology.However,trade secrets can be difficult to protect.The misappropriation of our trade secrets or other proprietary information could seriously harm our business.We protect our proprietary technology and processes,in par
187、t,through confidentiality agreements with our employees,consultants,suppliers and customers.We cannot be certain that these contracts have not been andwill not be breached,that we will be able to timely detect unauthorized use or transfer of our technology and intellectual property,that we will have
188、 adequateremedies for any breach,or that our trade secrets will not otherwise become known or be independently discovered by competitors.If we fail to use thesemechanisms to protect our technology and intellectual property,or if a court fails to enforce our intellectual property rights,our business
189、will suffer.We cannot becertain that these protection mechanisms can be successfully asserted in the future or will not be invalidated or challenged.Further,the laws and enforcement regimes of certain countries do not protect our technology and intellectual property to the same extent as do the laws
190、 andenforcement regimes of the U.S.In certain jurisdictions we may be unable to protect our technology and intellectual property adequately against unauthorized use,which could adversely affect our business.Our business may suffer if third parties assert that we violate their intellectual property r
191、ights.Third parties may claim that either we or our customers are infringing upon their intellectual property rights.Even if we believe that such claims are without merit,they can be time-consuming and costly to defend against and will divert managements attention and resources away from our busines
192、s.Furthermore,third partiesmaking such claims may be able to obtain injunctive or other equitable relief that could block our ability to further develop or commercialize some or all of ourproducts or services in the U.S.and abroad.Claims of intellectual property infringement also might require us to
193、 enter into costly settlement or license agreementsor pay costly damage awards.Even if we have an agreement that provides for a third party to indemnify us against such costs,the indemnifying party may beunable to perform its contractual obligations under the agreement.If we cannot or do not license
194、 the infringed intellectual property on reasonable terms,or need tosubstitute similar technology from another source,our business,financial position,results of operations and cash flows could suffer.Our licensing cycle is lengthy and costly,and our marketing,legal and sales efforts may be unsuccessf
195、ul.We generally incur significant marketing,legal and sales expenses prior to entering into our license agreements,generating a license fee and establishing a royaltystream from each licensee.The length of time it takes to establish a new licensing relationship,and/or for our customers to incorporat
196、e certain FotoNationtechnologies in their integrated circuits,can be 18 months or longer.As such,we may incur significant losses in any particular period before any associatedrevenue stream begins.13Table of ContentsOur business incurs significant reverse engineering expenditures on products of pote
197、ntial licensees in order to prepare sales and marketing collateral.We employintensive marketing and sales efforts to educate licensees,potential licensees and original equipment manufacturers about the benefits of our technologies.Inaddition,even if these companies adopt our technologies,they must d
198、evote significant resources to integrate fully our technologies into their operations.If ourmarketing and sales efforts are unsuccessful,then we may not be able to achieve widespread acceptance of our technology.In addition,ongoing litigation couldimpact our ability to gain new licensees which could
199、 have an adverse effect on our financial condition,results of operations and cash flows.If our licensees delay,refuse to or are unable to make payments to us due to financial difficulties or otherwise,or shift their licensed products to othercompanies to lower their royalties to us,our operating res
200、ults and cash flows could be adversely affected.A number of companies in the semiconductor and consumer electronics industries face severe financial difficulties from time to time.As a result,there have beenrecent bankruptcies and restructuring of companies in these industries.Our licensees may face
201、 similar financial difficulties which may result in their inability tomake payments to us in a timely manner,or at all.In addition,we have had a history of,and we may in the future experience,customers that delay or refuse tomake payments owed to us under license agreements.Our licensees may also me
202、rge with or may shift the manufacture of licensed products to companies that arenot currently licensees to us.This could make the collection process complex and difficult which could adversely impact our business,financial condition,resultsof operations and cash flows.We have in the past recorded,an
203、d may in the future record,significant valuation allowances on our deferred tax assets,and the recording and release ofsuch allowances may have a material impact on our results of operations and cause fluctuations in our stock price.During the third quarter of 2015,we released the valuation allowanc
204、e recorded primarily against Ireland deferred tax assets.We released a majority of ourvaluation allowance against U.S.federal deferred tax assets during the third quarter of 2014.The need for a valuation allowance requires an assessment of bothpositive and negative evidence when determining whether
205、it is more likely than not that deferred tax assets are recoverable;such assessment is required on ajurisdiction-by-jurisdiction basis.In making such assessment,significant weight is given to evidence that can be objectively verified.After considering bothnegative and positive evidence to assess the
206、 recoverability of our net deferred tax assets during the third quarter of 2014,we determined that it was more likely thannot we would realize our U.S.federal deferred tax assets.As such,we determined that no valuation allowance is required on the majority of our U.S.federaldeferred tax assets.Likew
207、ise,during the third quarter of 2015,we determined that it was more likely than not we would realize Ireland deferred tax assets.In thefuture,we may release valuation allowance and recognize deferred state tax assets or deferred tax assets of other foreign subsidiaries depending on achievingprofitab
208、ility in relevant jurisdictions.We continue to monitor the likelihood that we will be able to recover our deferred tax assets,including those for which avaluation allowance is still recorded.There can be no assurance that the Company will generate profits in future periods enabling it to fully reali
209、ze its deferred tax.The timing of recording a valuation allowance or the reversal of such valuation allowance is subject to objective and subjective factors that cannot be readilypredicted in advance.Both the establishment of a valuation allowance and the reversal of a previously recorded valuation
210、allowance may have a material impact onour quarterly financial results,which may lead to fluctuation in the value of our stock.Failure by the semiconductor industry to adopt our technology for the next generation high performance DRAM chips would significantly harm ourbusiness.To date,our technology
211、 has been used by several companies for high performance DRAM chips.For example,packaging using our technology is used for DDR3and DDR4 DRAM and we currently have licensees,including SK hynix Inc.,Samsung Electronics,Co.,Ltd.and Micron Technology,Inc.,who are payingroyalties for DRAM chips in advanc
212、ed packages.DRAM manufacturers are also currently developing next generation high performance DRAM chips to meet increasing speed and performance requirements ofelectronic products.We believe that these next-generation,high performance DRAM chips will require advanced technologies.We anticipate that
213、 royalties from shipments of these next generation,high performance DRAM chips using our technology may account for a significantpercentage of our future revenues.If semiconductor manufacturers do not continue to use our technology for the next generation of high performance DRAM chipsand find viabl
214、e alternative technologies for use with next generation high performance DRAM chips,or if we do not receive royalties from the next generation,high performance DRAM chips that use our technology,our future revenues could be adversely affected.14Table of ContentsOur technology may be too expensive fo
215、r certain next generation high performance DRAM manufacturers,which could significantly reduce the adoption rate ofour technology in next generation high performance DRAM chips.Even if our technology is selected for at least some of these next generation high performanceDRAM chips,there could be del
216、ays in the introduction of products utilizing these chips that could materially affect the amount and timing of any royalty paymentsthat we receive.Other factors that could affect adoption of our technology for next generation high performance DRAM products include delays or shortages ofmaterials an
217、d equipment and the availability of testing services.Our financial and operating results may vary,which may cause the price of our common stock to decline.Our quarterly operating results have fluctuated in the past and are likely to do so in the future.Because our operating results are difficult to
218、predict,one should notrely on quarterly or annual comparisons of our results of operations as an indication of our future performance.Factors that could cause our operating results tofluctuate during any period or that could adversely affect our ability to achieve our strategic objectives include th
219、ose listed in this“Risk Factors section of thisreport and the following:*the timing of,and compliance with license or service agreements and the terms and conditions for payment to us of license or service fees underthese agreements;*fluctuations in our royalties caused by the pricing terms of certa
220、in of our license agreements;*changes in our royalties caused by changes in demand for products incorporating semiconductors or wireless devices that use our licensedtechnology;*the amount of our product and service revenues;*changes in the level of our operating expenses;*delays in our introduction
221、 of new technologies or market acceptance of these new technologies through new license agreements;*our ability to protect or enforce our intellectual property rights or the terms of our agreements;*legal proceedings affecting our patents,patent applications or license agreements;*the timing of the
222、introduction by others of competing technologies;*changes in demand for semiconductor chips in the specific end markets in which we concentrate;*changes in demand for camera-enabled devices including cell phones,security systems and personal computers;*the timing of the conclusion of license agreeme
223、nts;*the length of time it takes to establish new licensing arrangements;*meeting the requirements for revenue recognition under generally accepted accounting principles;15Table of Contents*changes in generally accepted accounting principles including new accounting standards which may materially af
224、fect our revenue recognition;and*cyclical fluctuations in semiconductor markets generally.Due to fluctuations in our operating results,reports from market and security analysts,litigation-related developments,and other factors,the price at which ourcommon stock will trade is likely to continue to be
225、 highly volatile.In future periods,if our revenues or operating results are below the estimates or expectations ofpublic market analysts and investors,our stock price could decline.In the past,securities class action litigation has often been brought against companies followinga decline in the marke
226、t price of their securities.If our stock price is volatile,we may become involved in this type of litigation in the future.Any litigation couldresult in substantial costs and a diversion of managements attention and resources that are needed to successfully run our business.We may not continue to pa
227、y dividends at the same rate we are currently paying them,or at all,and any decrease in or suspension of the dividend couldcause our stock price to decline.In February 2015,we updated our capital allocation strategy.Given the change in business approach that moves us away from backward looking“episo
228、dic”payments,we discontinued the once-a-year payment of special dividends on episodic proceeds and instead announced a doubling of the current quarterly dividendto$0.20 per share which began in March 2015.We also return capital to shareholders through stock repurchases and plan to continue repurchas
229、ing stock in futureperiods.We anticipate that all quarterly dividends and stock repurchases will be paid out of cash,cash equivalents and short-term investments.The payment offuture cash dividends is subject to the final determination each quarter by our Board of Directors that the dividend remains
230、in our best interests,whichdetermination will be based on a number of factors,including our earnings,financial condition,capital resources and capital requirements,alternative uses ofcapital,economic condition and other factors considered relevant by management and the Board of Directors.Any decreas
231、e in the amount of the dividend,orsuspension or discontinuance of payment of a dividend,could cause our stock price to decline.Our stock repurchase program could increase the volatility of the price of our common stock,and the program may be suspended or terminated at anytime,which may cause the tra
232、ding price of our common stock to decline.In August 2007,we authorized a plan to repurchase our outstanding shares of common stock dependent on market conditions,share price and other factors.As ofDecember 31,2015,the total amount available for repurchase under the plan was$25.9 million.In January 2
233、016,the Board authorized an additional$200.0 millionin future repurchases under the plan.The amount of repurchases under our stock repurchase program will vary.During 2013,we repurchased approximately 1,500,000 shares for an aggregate amountof$28.8 million.In 2014,we repurchased approximately 2,800,
234、000 shares for an aggregate amount of$65.6 million.In 2015,we repurchased approximately3,300,000 shares for an aggregate amount of$119.2 million.Additionally,the timing of repurchases is at our discretion and the program may be suspended ordiscontinued at any time.Any suspension or discontinuation c
235、ould cause the market price of our stock to decline.The timing of repurchases pursuant to our stockrepurchase program could affect our stock price and increase its volatility.There can be no assurance that any stock repurchases will enhance stockholder valuebecause the market price of our common sto
236、ck may decline below the levels at which we effected repurchases.Furthermore,the Company may engage in mergers,acquisitions,or other activity that could result in us reducing or discontinuing share repurchases for a period of time.The investment of our cash,cash equivalents and investments in market
237、able debt securities are subject to risks which may cause losses and affect theliquidity of these investments.At December 31,2015,we held approximately$22.6 million in cash and cash equivalents and$359.1 million in short-term investments.These investments includevarious financial securities such as
238、municipal bonds and notes,corporate bonds and notes,commercial paper,treasury and agency notes and bills,and moneymarket funds.Although the Company invests in high quality securities,ongoing financial events have at times adversely impacted the general credit,liquidity,market and interest rates for
239、these and other types of debt securities.Changes in monetary policy by the Federal Reserve,government fiscal policies,and globaleconomic and market conditions may adversely affect the value of our investment portfolio.While we have historically held our investments to maturity,we mayin the future ha
240、ve a need to sell investments before their maturity dates,16Table of Contentswhich could result in losses on the sale of those investments.The financial market and monetary risks associated with our investment portfolio may have a materialadverse effect on our financial condition,results of operatio
241、ns and cash flows.We operate in a highly cyclical electronics industry,which is subject to significant downturns.The semiconductor industry has historically been cyclical and is characterized by wide fluctuations in product supply and demand.From time to time,this industryhas experienced significant
242、 downturns,often in connection with,or in anticipation of,declining economic conditions,maturing product and technology cycles,andexcess inventories.This cyclicality could cause our operating results to decline from one period to the next.Our business depends,in part,upon the volume ofproduction by
243、our licensees,which,in turn,depends upon the current and anticipated market demand for semiconductors and products that use semiconductors.Semiconductor manufacturers and package assembly companies generally sharply curtail their spending during industry downturns,and historically have loweredtheir
244、spending more than the decline in their revenues.As a result,our financial results have been,and will continue to be,impacted by the cyclicality of theelectronics industry.If we are unable to control our expenses adequately in response to lower revenues from our licensees and service customers in su
245、chdownturns,our results of operations and cash flows will be materially and adversely impacted.Changes in financial accounting or taxation standards,rules,practices or interpretation may cause adverse unexpected revenue and expense fluctuationswhich may impact our reported results of operations.We p
246、repare our consolidated financial statements in accordance with U.S.GAAP.These principles are subject to interpretations by the SEC and variousaccounting bodies.In addition,we are subject to various taxation rules in many jurisdictions.The existing taxation rules are generally complex,frequentlychan
247、ging and often ambiguous.Changes to taxation rules,changes to financial accounting standards such as the proposed convergence to international financialreporting standards,or any changes to the interpretations of these standards or rules may adversely affect our reported financial results or the way
248、 in which weconduct business.Recent accounting pronouncements and their estimated potential impact on our business are addressed in Note 3-“Recent AccountingPronouncements”in the Notes to Consolidated Financial Statements.The international nature of our business exposes us to financial and regulator
249、y risks that may have a negative impact on our consolidated financialposition,results of operations and cash flows,and we may have difficulty protecting our intellectual property in some foreign countries.We derive a significant portion of our revenues from licensees headquartered outside of the U.S
250、.We also have operations outside of the U.S.,including ourresearch and development facilities in Ireland,Romania and the United Kingdom,to design,develop,test or market certain technologies.International operationsare subject to a number of risks,including but not limited to the following:*changes i
251、n trade protection laws,policies and measures,and other regulatory requirements affecting trade and investment;*regulatory requirements and prohibitions that differ between jurisdictions;*laws and business practices favoring local companies;*withholding tax obligations on license revenues that we ma
252、y not be able to offset fully against our U.S.tax obligations,including the further risk thatforeign tax authorities may re-characterize license fees or increase tax rates,which could result in increased tax withholdings and penalties;*security concerns,including crime,political instability,terroris
253、t activity,armed conflict and civil or military unrest;*differing employment practices,labor issues and business and cultural factors;*less effective protection of intellectual property than is afforded to us in the U.S.or other developed countries;and*limited infrastructure and disruptions,such as
254、large-scale outages or interruptions of service from utilities or telecommunications providers.17Table of ContentsOur intellectual property is also used in a large number of foreign countries.There are many countries in which we currently have no issued patents.In addition,effective intellectual pro
255、perty enforcement may be unavailable or limited in some foreign countries.It may be difficult for us to protect our intellectual propertyfrom misuse or infringement by other companies in these countries.We expect this to become a greater problem for us as our licensees increase theirmanufacturing an
256、d sales in countries which provide less protection for intellectual property.Our inability to enforce our intellectual property rights in somecountries may harm our business,financial position,results of operations and cash flows.Our business and operating results may be harmed if we are unable to m
257、anage growth in our business,if we undertake any further restructuringactivities or if we dispose of a business division or dispose of or discontinue any product lines.We have in the past expanded our operations,domestically and internationally,and may continue to do so through both internal growth
258、and acquisitions.Forexample,in 2012,we acquired manufacturing capabilities in Zhuhai,China and commenced building out a manufacturing facility in Hsinchu,Taiwan,and wesubsequently closed the Zhuhai,China facility in 2013 and ceased operations in our Taiwan facility in 2014.To manage our growth effec
259、tively,we must continueto improve and expand our management,systems and financial controls.We also need to continue to expand,train and manage our employee base.If we areunable to effectively manage our growth or we are unsuccessful in recruiting and retaining personnel,our business and operating re
260、sults will be harmed.From time to time,we may undertake to restructure our business,including the disposition of a business division,or the disposition or discontinuance of a productline.For example,in March 2013,we announced the planned closure of our leased manufacturing facility in Zhuhai,China;i
261、n April 2013,we announced that wewere exploring a sale or other strategic alternatives for our DigitalOptics business;in August 2013,we announced the sale of a significant portion of the assets ofthe DigitalOptics manufacturing facility based in Charlotte,North Carolina;and in January 2014,we announ
262、ced a restructuring to cease our remainingmanufacturing operations,as well as the workforce reduction and facility closures in connection with the restructuring.There are several factors that could cause arestructuring,a disposition or a discontinuance to have an adverse effect on our business,finan
263、cial position,results of operations and cash flows.These includepotential disruption of our operations and our information technology systems,the timing of development of our technology,the deliveries of products or servicesto our customers,changes in our workforce and other aspects of our business.
264、In addition,such actions may increase the risk of claims or threats of lawsuits by ourcustomers or former employees.In the case of a disposition of a product line,there may be a risk of not identifying a purchaser,or,if identified,the purchase pricemay be less than the net asset book value for the p
265、roduct line.Employee morale and productivity could also suffer and we may lose employees whom we want tokeep.Any restructuring,disposition or discontinuance would require substantial management time and attention and may divert management from other importantwork.There are no assurances that a restr
266、ucturing,disposal or discontinuance will result in future profitability.We may also incur other significant liabilities andcosts including employee severance costs,relocation expenses,and impairment of lease obligations and long-lived assets.Moreover,we could encounter delays inexecuting any restruc
267、turing plans,which could cause further disruption and additional unanticipated expense.Disputes regarding our intellectual property may require us to indemnify certain licensees,the cost of which could adversely affect our businessoperations and financial condition.While we generally do not indemnif
268、y our licensees,some of our license agreements in our image enhancement business provide limited indemnities for certainactions brought by third parties against our licensees,and some require us to provide technical support and information to a licensee that is involved in litigationfor using our te
269、chnology.We may agree to provide similar indemnity or support obligations to future licensees.Our indemnity and support obligations could resultin substantial expenses.In addition to the time and expense required for us to indemnify or supply such support to our licensees,a licensees development,mar
270、keting and sales of licensed image enhancement products could be severely disrupted or shut down as a result of litigation,which in turn could have a materialadverse effect on our business operations,consolidated financial position,results of operations and cash flows.If we lose any of our key perso
271、nnel or are unable to attract,train and retain qualified personnel,we may not be able to execute our business strategyeffectively.Our success depends,in large part,on the continued contributions of our key management,engineering,sales,marketing,intellectual property,legal and financepersonnel,many o
272、f whom are highly skilled and would be difficult to replace.None of our senior management,key technical personnel or key sales personnel arebound by written employment contracts to remain with us for a specified period.In addition,we do not currently maintain key-person life insurance covering ourke
273、y personnel or have restrictions on their post-employment ability to solicit our employees,contractors or customers if key personnel voluntarily terminate theiremployment.The loss of any of our senior management or other key personnel could harm our ability to implement our business strategy and res
274、pond to therapidly changing market conditions in which we operate.Our future success will depend to a significant extent on the ability of these executives to effectively driveexecution of our business strategy,and on the ability of our management team to work together effectively.18Table of Content
275、sOur success also depends on our ability to attract,train and retain highly skilled managerial,engineering,sales,marketing,legal and finance personnel and on theabilities of new personnel to function effectively,both individually and as a group.Competition for qualified senior employees can be inten
276、se.We have alsoexperienced difficulty in hiring and retaining highly skilled engineers with appropriate qualifications to support our growth and expansion.Further,we must trainour new personnel,especially our technical support personnel,to respond to and support our licensees and customers.If we fai
277、l to do this,it could lead todissatisfaction among our licensees or customers,which could slow our growth or result in a loss of business.Our business operations could suffer in the event of information technology system failures or security breaches.Despite system redundancy and the implementation
278、of security measures within our internal and external information technology and networking systems,ourinformation technology systems may be subject to security breaches,damages from computer viruses,natural disasters,terrorism,and telecommunication failures.Any system failure or security breach cou
279、ld cause interruptions in our operations in addition to the possibility of losing proprietary information and trade secrets.To the extent that any disruption or security breach results in inappropriate disclosure of our confidential information,we may incur liability or additional costs toremedy the
280、 damages caused by these disruptions or security breaches.Decreased effectiveness of share-based compensation could adversely affect our ability to attract and retain employees.We have historically used stock options and other forms of stock-based compensation as key components of employee compensat
281、ion in order to align employeesinterests with the interests of our stockholders,encourage employee retention and provide competitive compensation and benefit packages.We incur significantcompensation costs associated with our stock-based compensation programs.Difficulties relating to obtaining stock
282、holder approval of equity compensation plansor changes to the plans could make it harder or more expensive for us to grant stock-based compensation to employees in the future.As a result,we may find itdifficult to attract,retain and motivate employees,and any such difficulty could have a materially
283、adverse impact on our business.Failure to comply with environmental regulations could harm our business.We use hazardous substances in the manufacturing and testing of prototype products and in the development of technologies in our research and developmentlaboratories.We are subject to a variety of
284、 local,state and federal regulations relating to the storage,discharge,handling,emission,generation,manufacture anddisposal of toxic or other hazardous substances.Our past,present or future failure to comply with environmental regulations could result in the imposition ofsubstantial fines,suspension
285、 of production,and alteration of our manufacturing processes or cessation of operations.Compliance with such regulations couldrequire us to acquire expensive remediation equipment or to incur other substantial expenses.Any failure to control the use,disposal,removal or storage of,or toadequately res
286、trict the discharge of,or assist in the cleanup of,hazardous or toxic substances,could subject us to significant liabilities,including joint and severalliabilities under certain statutes.The imposition of such liabilities could significantly harm our business,financial position,results of operations
287、 and cash flows.Our effective tax rate depends on our ability to secure the tax benefits of our international corporate structure,on the application of the tax laws ofvarious jurisdictions and on how we operate our business.Our international corporate structure and intercompany arrangements,includin
288、g the manner in which we market,develop,use and license our intellectual property,fund our operations and structure transactions with our international subsidiaries,may result in the reduction of our worldwide effective tax rate.Such internationalcorporate structure and intercompany arrangements are
289、 subject to examination by the tax authorities of the jurisdictions in which we operate,including the UnitedStates.The application of the tax laws of these jurisdictions to our international business activities is subject to interpretation and depends on our ability to operateour business in a manne
290、r consistent with our corporate structure and intercompany arrangements.Moreover,such tax laws are subject to change.Tax authoritiesmay disagree with our intercompany transfer pricing arrangements,including our transfer of intangibles,or determine that the manner in which we operate ourbusiness does
291、 not achieve the intended tax consequences.Additionally,future changes in the tax laws(such as proposed legislation to reform U.S.taxation ofinternational business activities)may have an adverse effect on our international corporate structure and operations.The result of an adverse determination of
292、anyof the above items could increase our worldwide effective tax rate and harm our financial position and results of operations.We have business operations located in places that are subject to natural disasters.Our business operations depend on our ability to maintain and protect our facilities,com
293、puter systems and personnel.Our corporate headquarters are located in theSan Francisco Bay Area,which in the past has experienced severe earthquakes.We do19Table of Contentsnot carry earthquake insurance.Earthquakes or other natural disasters could severely disrupt our operations,and have a material
294、 adverse effect on our business,results of operations,financial condition and prospects.We have made and may continue to make or to pursue acquisitions which could divert managements attention,cause ownership dilution to ourstockholders,or be difficult to integrate,which may adversely affect our fin
295、ancial results.We have made several acquisitions,and it is our current plan to continue to acquire companies,assets,patent portfolios and technologies that we believe arestrategic to our future business.For example,in the third quarter of 2015,we acquired Ziptronix,Inc.for approximately$39 million.I
296、nvestigating businesses,assets,patent portfolios or technologies and integrating newly acquired businesses,assets,patent portfolios or technologies could put a strain on our resources,could be costly and time consuming,and might not be successful.Such activities divert our managements attention from
297、 other business concerns.In addition,wemight lose key employees while integrating new organizations or operations.Acquisitions could also result in customer dissatisfaction,performance problems withan acquired company or technology,potentially dilutive issuances of equity securities or the incurrenc
298、e of debt,the assumption or incurrence of contingentliabilities,impairment charges related to goodwill and possible impairment charges related to other intangible assets or other unanticipated events orcircumstances,any of which could harm our business.Our plans to integrate and expand upon research
299、 and development programs and technologies obtained through acquisitions may result in products or technologiesthat are not adopted by the market.The market may adopt competitive solutions to our products or technologies.Consequently,we might not be successful inintegrating any acquired businesses,a
300、ssets,products or technologies,and might not achieve anticipated revenues and cost benefits.There are numerous risks associated with our acquisitions of businesses,technologies and patents.We have made a number of acquisitions of businesses,technologies and patents in recent years.These acquisitions
301、 are subject to a number of risks,including butnot limited to the following:*These acquisitions could fail to produce anticipated benefits,or could have other adverse effects that we currently do not foresee.As a result,theseacquisitions could result in a reduction of net income per share as compare
302、d to the net income per share we would have achieved if these acquisitionshad not occurred.We may also be required to recognize impairment charges of acquired assets or goodwill,and if we decide to restructure acquiredbusinesses,we may incur other restructuring charges.For example,in June 2012,we ac
303、quired a manufacturing operation in Zhuhai,China and,subsequently,this facility was closed in 2013.In January 2014,we announced a restructuring of our DigitalOptics business to cease its remainingmanufacturing operations,in connection with which we incurred approximately$49.0 million in restructurin
304、g and impairment charges in the fourthquarter of 2013.*The purchase price for each acquisition is determined based on significant judgment on factors such as projected value,quality and availability of thebusiness,technology or patent.In addition,if other companies have similar interests in the same
305、 business,technology or patent,our ability tonegotiate these acquisitions at favorable terms may be limited and the purchase price may be artificially inflated.*Following completion of these acquisitions,we may uncover additional liabilities,patent validity,infringement or enforcement issues or unfo
306、reseenexpenses not discovered during our diligence process.Any such additional liabilities,patent validity,infringement or enforcement issues or expensescould result in significant unanticipated costs not originally estimated,such as impairment charges of acquired assets and goodwill,and may harmour
307、 financial results.*The integration of technologies,patent portfolios and personnel,if any,will be a time consuming and expensive process that may disrupt ouroperations if it is not completed in a timely and efficient manner.If our integration efforts are not successful,our results of operations cou
308、ld beharmed,employee morale could decline,key employees could leave,and customer relations could be damaged.In addition,we may not achieveanticipated synergies or other benefits from any of these acquisitions.*We have incurred substantial direct transaction and integration costs as a result of past
309、acquisitions.In future acquisitions,the total direct transactioncosts and the costs of integration may exceed our expectations.20Table of Contents*Sales by the acquired businesses may be subject to different accounting treatment than our existing businesses,especially related to the recognition ofre
310、venues.This may lead to potential deferral of revenues due to new multiple-element revenue arrangements.*There may be a significant time lag between acquiring a patent portfolio and recognizing revenue from those patent assets.During that time lag,material costs are likely to be incurred in preparin
311、g licensing or litigation efforts that would have a negative effect on our results of operations,cashflows and financial position.*We may require external financing that is dilutive or presents risks of debt.*We are required to estimate and record fair values of contingent assets,liabilities,deferre
312、d tax assets and liabilities at the time of an acquisition.Eventhough these estimates are based on managements best judgment,the actual results may differ.Under the current accounting guidance,differencesbetween actual results and managements estimate could cause our operating results to fluctuate o
313、r could adversely affect our results of operations.If our amortizable intangible assets(such as acquired patents)become impaired,we may be required to record a significant charge to earnings.In addition to internal development,we intend to broaden our intellectual property portfolio through strategi
314、c relationships and acquisitions such as the Ziptronix,Inc.acquisition completed in the third quarter of 2015.We believe these strategic relationships and acquisitions will enhance the competitiveness and size of ourcurrent businesses and diversify into markets and technologies that complement our c
315、urrent businesses.These acquisitions could be in the form of asset purchases,equity investments,or business combinations.As a result,we may have intangible assets which are amortized over their estimated useful lives,equity investments,in-process research and development,and goodwill.We review our a
316、mortizable intangible assets(such as our patent portfolio)for impairment when events orchanges in circumstances indicate the carrying value may not be recoverable or the useful life is shorter than originally estimated.Factors that may be considered achange in circumstances indicating that the carry
317、ing value of our amortizable or other intangible assets may not be recoverable include a decline in future cashflows,fluctuations in market capitalization,slower growth rates in our industry or slower than anticipated adoption of our products by our customers.In the firstquarter of 2013,we recorded
318、an impairment of goodwill of$6.7 million when we revised our business strategy for the DigitalOptics business to concentrate itsmanufacturing efforts on the lens barrel,rather than the whole camera module.This revised strategy made our leased manufacturing facility in Zhuhai,Chinaunnecessary and the
319、 goodwill tied to the facility became impaired.We also recorded an$8.7 million charge due to the abandonment of existing patents andtechnology,which caused a revision of the useful life estimate of these patent and technology assets thus fully impairing them.In the fourth quarter of 2013,werecorded
320、an impairment of intangible assets of approximately$7.0 million in connection with the restructuring that we announced in January 2014.As we continueto review for factors that may affect our business which may not be in our control,we may be required to record a significant charge to earnings in our
321、 financialstatements during the period in which any impairment of our amortizable intangible assets or equity investments is determined,resulting in an adverse impact onour business,financial position or results of operations.Compliance with changing regulation of corporate governance and public dis
322、closure may result in additional expenses.Changing laws,regulations and standards relating to corporate governance and public disclosure,new SEC regulations,requirements placed on non-financialcompanies under the Dodd-Frank Act and the NASDAQ Stock Market rules,have created uncertainty for companies
323、.These laws,regulations and standards areoften subject to varying interpretations.As a result,their application in practice may evolve as new guidance is provided by regulatory and governing bodies,which could result in higher costs necessitated by ongoing revisions to disclosure and governance prac
324、tices.As a result of our efforts to comply with evolvinglaws,regulations and standards,we have increased and may continue to increase general and administrative expenses and diversion of management time andattention from revenue-generating activities to compliance activities.Provisions of our certif
325、icate of incorporation and bylaws or Delaware law might delay or prevent a change of control transaction and depress the marketprice of our stock.Various provisions of our certificate of incorporation and bylaws might have the effect of making it more difficult for a third party to acquire,or discou
326、raging athird party from attempting to acquire,control of our company.These provisions could limit21Table of Contentsthe price that certain investors might be willing to pay in the future for shares of our common stock.Certain of these provisions eliminate cumulative voting in theelection of directo
327、rs,authorize the board to issue“blank check”preferred stock,prohibit stockholder action by written consent,eliminate the right of stockholdersto call special meetings,and establish advance notice procedures for director nominations by stockholders and the submission of other proposals for considerat
328、ionat stockholder meetings.We are also subject to provisions of Delaware law which could delay or make more difficult a merger,tender offer or proxy contestinvolving our company.In particular,Section 203 of the Delaware General Corporation Law prohibits a Delaware corporation from engaging in any bu
329、sinesscombination with any interested stockholder for a period of three years unless specific conditions are met.Any of these provisions could have the effect ofdelaying,deferring or preventing a change in control,including without limitation,discouraging a proxy contest or making more difficult the
330、 acquisition of asubstantial block of our common stock.Item 1B.Unresolved Staff CommentsNot applicable.Item 2.PropertiesOur principal corporate administrative,sales,marketing and research and development facilities are located in San Jose,California,and are held under an operatinglease.We have resea
331、rch and development and marketing support facilities in Ireland and Romania that are held under operating leases.We believe our existingfacilities are suitable and adequate for our current needs.Item 3.Legal ProceedingsOther than to the extent the proceedings described below have concluded,we cannot
332、 predict the outcome of any of the proceedings described below.An adversedecision in any of these proceedings could significantly harm our business and our consolidated financial position,results of operations,and cash flows.Tessera,Inc.v.UTAC(Taiwan)Corporation,Civil Action No.5:10-04435-EJD(N.D.Ca
333、l.)On September 30,2010,Tessera,Inc.filed a complaint against UTAC(Taiwan)Corporation(“UTAC Taiwan”)in the U.S.District Court for the Northern Districtof California.Tessera,Inc.s complaint alleges causes of action for breach of contract,declaratory relief,and breach of the implied covenant of good faith and fairdealing.The complaint seeks,among other things,a judicial determination and declaration
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