8x8 2013 Annual Report Download - page 16

14
As our customer base grows and their usage of telecommunications capacity increases, we will be required to make additional
investments in our capacity to maintain adequate data transmission speeds, the availability of which may be limited or the cost
of which may be on terms unacceptable to us. If adequate capacity is not available to us as our customers’ usage increases, our
network may be unable to achieve or maintain sufficiently high data transmission capacity, reliability or performance. In
addition, our business would suffer if our network suppliers increased the prices for their services and we were unable to pass
along the increased costs to our customers.
We depend on contract manufacturers to manufacture substantially all of our products and third party vendors for IP
phones, and any delay or interruption in manufacturing by these contract manufacturers or vendors would result in
delayed or reduced shipments to our customers and may harm our business.
We do not have long-term purchase agreements with our contract manufacturers and we depend on a concentrated group of
contract manufacturers for a substantial portion of manufacturing our products. There can be no assurance that our contract
manufacturers will be able or willing to reliably manufacture our products, in volumes, on a cost-effective basis or in a timely
manner. If we cannot compete effectively for the business of these contract manufacturers, or if any of the contract
manufacturers experience financial or other difficulties in their businesses, our revenue and our business could be adversely
affected. In particular, if one of our contract manufacturers becomes subject to bankruptcy proceedings, we may not be able to
obtain any of our products held by the contract manufacturer.
We also rely on third party vendors for IP phones to utilize our service. We currently do not have long-term supply contracts
with any of these vendors. As a result, most of these third party vendors are not obligated to provide products or services to us
for any specific period, in any specific quantities or at any specific price, except as may be provided in a particular purchase
order. The inability of these third party vendors to deliver IP phones of acceptable quality and in a timely manner, particularly
the sole source vendors, could adversely affect our operating results or cause them to fluctuate more than anticipated.
Additionally, some of our products may require specialized or high-performance component parts that may not be available in
quantities or in time frames that meet our requirements.
Our infringement of a third party’s proprietary technology could disrupt our business.
There has been substantial litigation in the communications, VoIP services, semiconductor, electronics, and related industries
regarding intellectual property rights and, from time to time, third parties may claim infringement by us of their intellectual
property rights. Our broad range of current and former technology, including IP telephony systems, digital and analog circuits,
software, and semiconductors, increases the likelihood that third parties may claim infringement by us of their intellectual
property rights. For example, on May 2, 2008, we received a letter from AT&T Intellectual Property, L.L.C. (“AT&T IP”)
expressing the belief that we must license a specified patent for use in our 8x8 broadband telephone service, as well as
suggesting that we obtain a license to its portfolio of MPEG-4 patents for use with our video telephone products and services.
At the same time, we began an evaluation of whether AT&T IP’s affiliated entities may need to license any of our patents or
other intellectual property. We have continued to engage in discussions with AT&T IP to explore a mutually agreeable
resolution of the parties’ respective assertions regarding these intellectual property issues. We are unable at this time to state
whether we will enter into any license or cross-license agreements with AT&T IP or whether we ultimately anticipate any
material effects on our operating results or financial condition as a consequence of these matters.
Certain technology necessary for us to provide our services may, in fact, be patented by other parties either now or in the
future. If such technology were held under patent by another person, we would have to negotiate a license for the use of that
certain technology. We may not be able to negotiate such a license at a price that is acceptable. The existence of such a patent,
or our inability to negotiate a license for any such technology on acceptable terms, could force us to cease using such
technology and offering products and services incorporating such technology.
Wehaverecentlybeennamedasdefendantsinseveralpatentinfringementlawsuits.For example:
On February 22, 2011, we were named a defendant in a lawsuit, Bear Creek Technologies, Inc. v. 8x8, Inc. et al., along
with 20 other defendants.
On October 25, 2011, we were named a defendant in a lawsuit, Klausner Technologies, Inc. v. Oracle Corporation et al.,
along with 30 other defendants.