8x8 1999 Annual Report Download - page 25

and no single company possesses all the required technology components needed to build a complete end to end solution. Partnerships will be
required to augment the Company's development programs and to assist it in marketing complete solutions to its customer base. There can be
no assurance that the Company will be capable of developing such partnerships in the course of its product development. Even if the Company
does establish the necessary partnerships, there can be no assurance that the Company will be able to adequately capitalize on these
partnerships to aid in the success of the Company's business.
DEPENDENCE ON PROPRIETARY TECHNOLOGY; RELIANCE ON THIRD PARTY LICENSES
The Company relies in part on trademark, copyright and trade secret law to protect its intellectual property in the United States and abroad. The
Company seeks to protect its software, documentation and other written materials under trade secret and copyright law, which afford only
limited protection. The Company also relies in part on patent law to protect its intellectual property in the United States and abroad. The
Company currently holds nine United States patents, including patents relating to programmable integrated circuit architectures, telephone
control arrangements, software structures and memory architecture technology, and has a number of United States and foreign patent
applications pending. There can be no assurance that any such patent applications will result in an issued patent. There can be no assurance that
the Company's means of protecting its proprietary rights in the United States or abroad (where effective intellectual property protection may be
unavailable or limited) will be adequate or that competitors will not independently develop technologies that are similar or superior to the
Company's technology, duplicate the Company's technology or design around any patent of the Company. The Company has in the past
licensed and in the future expects to continuing licensing its technology to others, many of whom are located or may be located abroad.* There
are no assurances that such licensees will protect the Company's technology from misappropriation. Moreover, litigation may be necessary in
the future to enforce the Company's intellectual property rights, to determine the validity and scope of the proprietary rights of others, or to
defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of management time and
resources and could have a material adverse effect on the Company's business and operating results.
There has been substantial litigation in the semiconductor, electronics and related industries regarding intellectual property rights, and there can
be no assurance that third parties will not claim infringement by the Company of their intellectual property rights. The Company's broad range
of technology, including systems, digital and analog circuits, software and semiconductors, increases the likelihood that third parties may claim
infringement by the Company of their intellectual property rights. If the Company were found to be infringing on the intellectual property
rights of any third party, the Company could be subject to liabilities for such infringement, which could be material, and the Company could be
required to refrain from using, manufacturing or selling certain products or using certain processes, either of which could have a material
adverse effect on the Company's business and operating results. From time to time, the Company has received, and may continue to receive in
the future, notices of claims of infringement, misappropriation or misuse of other parties' proprietary rights. There can be no assurance that the
Company will prevail in these discussions and actions, or that other actions alleging infringement by the Company of third-party patents will
not be asserted or prosecuted against the Company.
On March 2, 1999, the Company was informed that the Lemelson Foundation Partnership filed a lawsuit in the United States District Court in
Phoenix, Arizona on February 26, 1999, against the Company and eighty-seven other United States semiconductor and electronics companies
for alleged infringement of patent rights claimed to be owned by the Lemelson Medical Foundation. Litigation may be necessary in the future
to determine the validity and scope of the claimed proprietary rights of the Lemelson Medical Foundation, or to
* This statement is a forward looking statement reflecting current expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations. See "Manufacturing" commencing on page 15, "Competition" commencing on
page 13 and "Factors That May Affect Future Results" commencing on page 17 for a discussion of certain factors that could affect future
performance.
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