8x8 2009 Annual Report Download - page 20

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harm our business. These licenses are on standard commercial terms made generally available by the companies providing the
licenses. The cost and terms of these licenses individually are not material to our business.
Inability to protect our proprietary technology would disrupt our business.
We rely, in part, on trademark, copyright, and trade secret law to protect our intellectual property in the United States and
abroad. We seek to protect our software, documentation, and other written materials under trade secret and copyright law,
which afford only limited protection. We also rely, in part, on patent law to protect our intellectual property in the United
States and internationally. As of March 31, 2009, we had been awarded 73 United States patents and have additional United
States and foreign patent applications pending. We cannot predict whether such pending patent applications will result in
issued patents that effectively protect our intellectual property. We may not be able to protect our proprietary rights in the
United States or internationally (where effective intellectual property protection may be unavailable or limited), and
competitors may independently develop technologies that are similar or superior to our technology, duplicate our technology or
design around any patent of ours. We have, in the past, licensed and, in the future, expect to continue licensing our technology
to others, many of whom are located or may be located abroad. There are no assurances that such licensees will protect our
technology from misappropriation. Moreover, litigation may be necessary in the future to enforce our 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 our business, financial condition, and operating results. Any settlement or adverse determination in
such litigation would also subject us to significant liability.
Our products must comply with industry standards, FCC regulations, state, local, country-specific and international
regulations, and changes may require us to modify existing products and/or services.
In addition to reliability and quality standards, the market acceptance of telephony over broadband IP networks is dependent
upon the adoption of industry standards so that products from multiple manufacturers are able to communicate with each other.
Our VoIP telephony products rely heavily on communication standards such as SIP, MGCP and network standards such as
TCP/IP and UDP to interoperate with other vendors' equipment. There is currently a lack of agreement among industry leaders
about which standard should be used for a particular application, and about the definition of the standards themselves. These
standards, as well as audio and video compression standards, continue to evolve. We also must comply with certain rules and
regulations of the Federal Communications Commission (FCC) regarding electromagnetic radiation and safety standards
established by Underwriters Laboratories, as well as similar regulations and standards applicable in other countries. Standards
are continuously being modified and replaced. As standards evolve, we may be required to modify our existing products or
develop and support new versions of our products. We must comply with certain federal, state and local requirements regarding
how we interact with our customers, including marketing practices, consumer protection, privacy, and billing issues, the
provision of 9-1-1 emergency service and the quality of service we provide to our customers. The failure of our products and
services to comply, or delays in compliance, with various existing and evolving standards could delay or interrupt volume
production of our VoIP telephony products, subject us to fines or other imposed penalties, or harm the perception and adoption
rates of our service, any of which would have a material adverse effect on our business, financial condition or operating results.
Our ability to offer services outside the U.S. is subject to the local regulatory environment, which may be unknown,
complicated and uncertain.
Regulatory treatment of VoIP telephony outside the United States varies from country to country and often the laws are
unclear. We currently distribute our products and services directly to consumers and through resellers that may be subject to
telecommunications regulations in their home countries. The failure by us or our customers and resellers to comply with these
laws and regulations could reduce our revenue and profitability. Because of our relationship with the resellers, some countries
may assert that we are required to register as a telecommunications provider in that country. In such case, our failure to do so
could subject us to fines or penalties. In addition, some countries are considering subjecting VoIP services to the regulations
applied to traditional telephone companies. Regulatory developments such as these could have a material adverse effect on our
international operation.
Future legislation or regulation of the Internet and/or voice and video over IP services could restrict our business,
prevent us from offering service or increase our cost of doing business.
There are an increasing number of regulations and rulings that specifically address access to commerce and communications
services on the Internet, including IP telephony. We are unable to predict the impact, if any, that future legislation, legal
decisions or regulations concerning the Internet may have on our business, financial condition, and results of operations.