2K Sports 2008 Annual Report Download - page 30

approval process for products by hardware manufacturers and other licensors make it difficult to predict
the quarter in which our products will ship and therefore may cause us to fail to meet financial
expectations.
If we are unable to protect the intellectual property relating to our software, the commercial value of our
products will be adversely affected and our competitive position could be harmed.
We develop proprietary software and have obtained the rights to publish and distribute software developed
by third parties. We attempt to protect our software and production techniques under copyright, trademark
and trade secret laws as well as through contractual restrictions on disclosure, copying and distribution.
Our software is susceptible to piracy and unauthorized copying. Unauthorized third parties may be able to
copy or to reverse engineer our software to obtain and use programming or production techniques that we
regard as proprietary. Well organized piracy operations have also proliferated in recent years, resulting in
the ability to download pirated copies of our software over the Internet. Although we attempt to
incorporate protective measures into our software, piracy of our products could negatively impact our
future profitability.
Data breaches involving the source code for our products could adversely affect our revenues.
We securely store the source code for our interactive entertainment software products as it is created. A
breach, whether physical, electronic or otherwise, of the systems on which such source code and other
sensitive data is stored could lead to damage or piracy of our software. If we are subject to data security
breaches, we may have a loss in sales or increased costs arising from the restoration or implementation of
additional security measures which could materially and adversely affect our profitability.
If we infringe on or are alleged to infringe on the intellectual property rights of third parties, our business
could be adversely affected.
With advances in technology, game content and software graphics are expected to continue to become
more realistic. As a result, we believe that interactive entertainment software will increasingly become the
subject of claims that such software infringes on the intellectual property rights of others. From time to
time, we receive notices from third parties or are named in lawsuits by third parties alleging infringement
of their proprietary rights. Although we believe that our software and technologies and the software and
technologies of third party developers and publishers with whom we have contractual relations do not and
will not infringe or violate proprietary rights of others, it is possible that infringement of proprietary rights
of others may occur. Any claims of infringement, with or without merit, could be time consuming, costly
and difficult to defend. Moreover, intellectual property litigation or claims could require us to discontinue
the distribution of products, obtain a license or redesign our products, which could result in additional
substantial costs and material delays.
Our software is susceptible to errors, which can harm our financial results and reputation.
The technological advancements of new hardware platforms result in the development of more complex
software products. As software products become more complex, the risk of undetected errors in new
products increases. We may need to produce and distribute patches in order to repair such errors, which
could be costly and may distract our developers from working on new products. If, despite testing, errors
are found in new products or releases after shipments have been made, we could experience a loss of or
delay in timely market acceptance, product returns, loss of revenue, increases in costs relating to the repair
of such errors and damage to our reputation.
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