Classmates.com 2006 Annual Report Download - page 20

A security breach or inappropriate use of our network or services could expose us to claims or a loss of revenue.
The success of our business depends on the security of our networks and, in part, on the security of the network infrastructures of our third-
party vendors. Unauthorized or inappropriate access to, or use of, our networks, computer systems and services could potentially jeopardize the
security of confidential information, including credit card information, of our users and of third parties. Third parties have in the past used our
networks, services and brand names to perpetrate crimes, such as identity theft or credit card theft, and may do so in the future. Users or third
parties may assert claims of liability against us as a result of any failure by us to prevent security breaches, unauthorized disclosure of user
information or other such activities. Although we use security measures that we believe to be effective by industry standards, we cannot assure
you that the measures we take will be successfully implemented or will be effective in preventing these types of activities. We also cannot assure
you that the security measures of our third
-party network providers, providers of customer and billing support services or other vendors will be
adequate. In addition to potential legal liability, these activities may adversely impact our reputation or our revenues and may interfere with our
ability to provide our services, all of which could adversely impact our business.
Harmful software programs such as viruses could disrupt our business.
Our business is dependent on the continued acceptance of the Internet as an effective medium. Damaging software programs, such as
computer viruses, worms and Trojan horses, have from time to time been disseminated through the Internet and have caused significant
disruption to Internet users. Certain of these programs have disabled the ability of computers to access the Internet, requiring users to obtain
technical support in order to gain access to the Internet. Other programs have had the potential to damage or delete computer programs. The
development and widespread dissemination of harmful programs has the potential to seriously disrupt Internet usage. If Internet usage is
significantly disrupted for an extended period of time, or if the prevalence of these programs results in decreased residential Internet usage, our
business could be materially and adversely impacted. In addition, actions taken by us or our telecommunications providers to attempt to
minimize the spread of harmful programs could adversely impact our users’ ability to utilize our services.
Our failure to protect our proprietary rights could harm our business.
Our trademarks, patents, copyrights, domain names and trade secrets are important to the success of our business. We principally rely upon
patent, trademark, copyright, trade secret and contract laws to protect our proprietary technology. The protection of our proprietary rights may
require the expenditure of significant financial and internal resources. We cannot assure you that we have taken adequate steps to prevent
misappropriation of our rights. Our failure to adequately protect our proprietary rights could adversely affect our brands.
Legal actions, particularly those associated with proprietary rights, could subject us to substantial liability and expense and require us
to change our business practices.
We are currently, and have been in the past, party to various legal actions. These actions include, without limitation, claims by private
parties in connection with consumer protection and other laws, claims that we infringe third party patents, claims in connection with employment
practices, securities laws claims, breach of contract claims and other business-related claims. The nature of our business could subject us to
additional claims for similar matters, as well as a wide variety of other claims including, without limitation, claims for defamation, negligence,
trademark infringement, copyright infringement, and privacy matters. Various governmental agencies may also assert claims or institute
investigations relating to our business practices, such as our marketing, billing, customer retention, cancellation, refund or disclosure practices.
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