Digital River 2002 Annual Report Download - page 25

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Claims against us related to the software products that we deliver electronically and the tangible goods that we deliver physically could
also require us to expend significant resources.
Claims may be made against us for negligence, copyright or trademark infringement, products liability or other theories based on the nature and
content of software products or tangible goods that we deliver electronically and physically. Because we did not create these products, we are
generally not in a position to know the quality or nature of the content of these products. Although we carry general liability insurance and
require that our customers indemnify us against end-user claims, our insurance and indemnification measures may not cover potential claims of
this type, adequately cover all costs incurred in defense of potential claims, or reimburse us for all liability that may be imposed. Any costs or
imposition of liability that are not covered by insurance or indemnification measures could be expensive and time-consuming to address, distract
management and delay product deliveries even if we were ultimately successful in the defense of these claims.
Security breaches could hinder our ability to securely transmit confidential information.
A significant barrier to electronic commerce and communications is the secure transmission of confidential information over public networks.
Any compromise or elimination of our security could be costly to remedy, damage our reputation and expose us to liability, and dissuade
existing and new clients from using our services. We rely on encryption and authentication technology licensed from third parties to provide the
security and authentication necessary for secure transmission of confidential information, such as end-user credit card numbers. A party who
circumvents our security measures could misappropriate proprietary information or interrupt our operations.
We may be required to expend significant capital and other resources to protect against security breaches or address problems caused by
breaches. Concerns over the security of the Internet and other online transactions and the privacy of users could deter people from using the
Internet to conduct transactions that involve transmitting confidential information, thereby inhibiting the growth of the Internet. To the extent
that our activities or those of third-party contractors involve the storage and transmission of proprietary information, such as credit card
numbers, security breaches could damage our reputation and expose us to a risk of loss or litigation and possible liability. Our security measures
may not prevent security breaches and failure to prevent security breaches could lead to a loss of existing clients and deter potential clients away
from our services.
Loss of our credit card acceptance privileges would seriously hamper our ability to process the sale of digital goods.
The payment by end-users for the purchase of digital goods that we process is typically made by credit card. If we incur significant instances of
credit card fraud over an extended period of time, it may result in penalties and termination of our credit card acceptance privileges. Loss of our
credit card acceptance privileges would severely impact our ability to process the sale of digital goods where the payment method is by credit
card. We may be required to expend significant capital and other resources to protect against these fraudulent transactions.
The listing of our network addresses on anti-SPAM lists could harm our ability to service our clients and deliver goods over the
Internet.
Certain privacy and anti-email proponents have engaged in a practice of gathering and publicly listing network addresses that they believe have
been involved in sending unwanted, unsolicited emails commonly known as SPAM. In response to user complaints about SPAM, Internet
service providers have from time to time blocked such network addresses from sending emails to their users. If our network addresses
mistakenly end up on these SPAM lists, our ability to provide services for our clients and consummate the sales of digital and physical goods
over the Internet could be harmed.