Digital River 2006 Annual Report Download - page 29

We may not carry sufficient business interruption insurance to fully compensate us for losses that may
occur.
We may become liable to clients who are dissatisfied with our services.
We design, develop, implement and manage e-commerce solutions that are crucial to the operation of our
clients’ businesses. Defects in the solutions we develop could result in delayed or lost revenue, adverse end-
user reaction, and/or negative publicity, which could require expensive corrections. As a result, clients who
experience these adverse consequences either directly or indirectly by using our services could bring claims
against us for substantial damages. Any claims asserted could exceed the level of any insurance coverage that
may be available to us. The successful assertion of one or more large claims that are uninsured, that exceed
insurance coverage or that result in changes to insurance policies, including future premium increases that
could adversely affect our operating results or financial condition.
We depend on key personnel.
Our future success significantly depends on the continued services and performance of our senior
management. Our performance also depends on our ability to retain and motivate our key technical employees
who are skilled in maintaining our proprietary technology platforms. The loss of the services of any of our
executive officers or key employees could harm our business if we are unable to effectively replace that officer
or employee, or if that person should decide to join a competitor or otherwise directly or indirectly compete
with us. Further, we may need to incur additional operating expenses and divert other management time in
order to search for a replacement.
Our future success depends on our ability to continue to identify, attract, hire, train, retain and motivate
highly skilled personnel. Competition for these personnel is intense, particularly in the Internet industry. We
may be unable to successfully attract, assimilate or retain sufficiently qualified personnel. In making
employment decisions, particularly in the Internet and high-technology industries, job candidates often
consider the value of stock option grants they are to receive in connection with their employment. Fluctuations
in our stock price may make it more difficult to retain and motivate employees. Consequently, potential
employees may perceive our equity incentives as less attractive and current employees whose equity incentives
are no longer attractively priced may choose not to remain with our organization. In that case, our ability to
attract employees will be adversely affected. As a result, our ability to use stock options as equity incentives
will be adversely affected, which will make it more difficult to compete for and attract qualified personnel.
Finally, should our stock price substantially decline, the retention value of stock options may weaken and
employees who hold such options may choose not to remain with our organization.
Protecting our intellectual property is critical to our success.
We regard the protection of our trademarks, copyrights, trade secrets and other intellectual property as
critical to our success. We rely on a combination of patent, copyright, trademark, service mark and trade secret
laws and contractual restrictions to protect our proprietary rights. We have entered into confidentiality and
invention assignment agreements with our employees and contractors, and nondisclosure agreements with
parties with whom we conduct business, in order to limit access to and disclosure of our proprietary
information. These contractual arrangements and the other steps taken by us to protect our intellectual property
may not prevent misappropriation of our technology or deter independent third-party development of similar
technologies. We also seek to protect our proprietary position by filing U.S. patent applications related to our
proprietary technology, inventions and improvements that are important to the development of our business.
Proprietary rights relating to our technologies will be protected from unauthorized use by third parties only to
the extent they are covered by valid and enforceable patents or are effectively maintained as trade secrets. We
pursue the registration of our trademarks and service marks in the U.S. and internationally. Effective
trademark, service mark, copyright and trade secret protection may not be available in every country in which
our services are made available online.
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