Classmates.com 2010 Annual Report Download - page 25

Table of Contents
marketing, billing, customer retention, renewal, cancelation, refund, or disclosure practices. The Federal Trade Commission and certain state
agencies have investigated Internet companies, including us, in connection with consumer protection and privacy matters. In addition, we have
received civil investigative demands and subpoenas, as applicable, from the Attorneys General of various states, primarily regarding their
respective investigations into certain post-transaction sales practices and certain of our marketing, billing and renewal practices. We have been
cooperating with these investigations and have resolved one of the investigations. However, the outcome of these or any other governmental
investigations or their potential implications for our business are uncertain. We may not prevail in existing or future claims and any judgment
against us or settlement or resolution of such claims may involve the payment of significant sums, including damages, fines, penalties, or
assessments, or changes to our business practices. Defending against lawsuits, inquiries and investigations involves significant expense and
diversion of management's attention and resources from other matters. There are no assurances that additional governmental investigations or
other legal actions will not be instituted in connection with our former post-transaction sales practices or other current or former business
practices. Enforcement actions or changes in enforcement policies and procedures could result in changes to our business practices as well as
significant fines, penalties or assessments, which could decrease our revenues or increase the costs of operating our business. To the extent that
our services and business practices change as a result of claims or actions by governmental agencies or private parties, or we are required to pay
significant sums, including damages, fines, penalties, or assessments, our business, financial condition, results of operations, and cash flows
could be materially and adversely affected.
Our failure to enforce and protect our intellectual property and proprietary rights could harm our business.
Our trade names, trademarks, service marks, patents, copyrights, domain names, trade secrets, and other intellectual property are important
to the success of our businesses. In particular, we view our primary trademarks as critical to our success. We principally rely upon patent,
trademark, copyright, trade secret, and domain name laws in the U.S. and similar laws in other countries, as well as licenses and other
agreements with our employees, members, consumers, suppliers and other parties, to establish and maintain our intellectual property and
proprietary rights in the technology, products, services and content used in our operations. These laws and agreements may not guarantee that
our proprietary rights will be protected and our intellectual property and proprietary rights could be challenged or invalidated. We also license
some of our intellectual property rights, including the Mercury Man logo, to third parties. The steps we and such third parties have taken to
protect our intellectual property and proprietary rights may not be adequate, and other third parties may infringe or misappropriate our
intellectual property and proprietary rights. The protection of our intellectual property and proprietary rights may require the expenditure of
significant financial and internal resources. We cannot assure you that we have taken adequate steps to prevent infringement or misappropriation
of our intellectual property and proprietary rights. Our failure to adequately protect our intellectual property and proprietary rights could
adversely affect our brands and could harm our business.
A security breach or inappropriate access to, or use of, our networks, computer systems or services or those of third
-party vendors could
expose us to liability, claims and 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 or services, whether intentional, unintentional
or as a result of criminal activity, could potentially jeopardize the security of confidential information, including credit card information, of our
customers and of third parties. We cannot assure you that the security measures we take 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
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