Earthlink 2014 Annual Report Download - page 27

Table of Contents
We are also subject to the risks associated with the resolution of various third-
party disputes, lawsuits, arbitrations and proceedings affecting our
Business Services segment. The deregulation of the telecommunications industry, the implementation of the Telecommunications Act of 1996,
the evolution of telecommunications infrastructure from time-
division multiplexing to Internet Protocol, and the distress of many carriers in the
telecommunications industry as a result of continued competitive factors and financial pressures have resulted in the involvement of numerous
industry participants in disputes, lawsuits, proceedings and arbitrations before state and federal regulatory commissions, private arbitration
organizations such as the American Arbitration Association, and courts over many issues that will be important to our financial and operational
success. These issues include the interpretation and enforcement of existing interconnection agreements and tariffs, the terms of new
interconnection agreements, operating performance obligations, intercarrier compensation, treatment of different categories of traffic (for
example, traffic originated or terminated on wireless or VoIP), the jurisdiction of traffic for intercarrier compensation purposes, the wholesale
services and facilities available to us, the prices we will pay for those services and facilities and the regulatory treatment of new technologies and
services.
We may be accused of infringing upon the intellectual property rights of third parties, which is costly to defend and could limit our ability to
use certain technologies in the future.
From time to time third parties have alleged that we infringe on their intellectual property rights, including patent rights, and we expect to
continue to be subject to such claims. We may be unaware of filed patent applications and of issued patents that could be related to our products
and services. These claims are often made by patent holding companies that are not operating companies. The alleging parties generally seek
royalty payments for prior use as well as future royalty streams. Defending against disputes, litigation or other legal proceedings, whether or not
meritorious, may involve significant expense and diversion of management's attention and resources from other matters. Due to the inherent
uncertainties of litigation, we may not prevail in these actions. Both the costs of defending lawsuits and any settlements or judgments against us
could adversely affect our results of operations and cash flows.
We may not be able to protect our intellectual property.
We regard our trademarks, including EarthLink, EarthLink Business, EarthLink Carrier and PeoplePC, as valuable assets to our business. In
particular, we believe the strength of these brands among existing and potential customers is important to the success of our business.
Additionally, our EarthLink, EarthLink Business, EarthLink Carrier and PeoplePC service marks, proprietary technologies, domain names and
similar intellectual property are also important to the success of our business. We principally rely upon trademark law as well as contractual
restrictions to establish and protect our technology and proprietary rights and information. We require employees and consultants and, when
possible, suppliers and distributors to sign confidentiality agreements, and we generally control access to, and distribution of, our technologies,
documentation and other proprietary information. The efforts we have taken to protect our proprietary rights may not be sufficient or effective.
Third parties may infringe or misappropriate our trademarks and similar proprietary rights. If we are unable to protect our proprietary rights from
unauthorized use, our brand image may be harmed and our business may suffer. In addition, protecting our intellectual property and other
proprietary rights is expensive and time consuming. Any increase in the unauthorized use of our intellectual property could adversely affect our
results of operations and cash flows.
We may be unable to hire and retain sufficient qualified personnel, and the loss of any of our key executive officers could adversely affect us.
Our business depends on our ability to hire and retain key executive officers, senior management, sales, IT and other key personnel, many of
whom have significant experience in our industry and whose expertise is required to successfully transition our business into a leading managed
network, security and cloud provider. There is substantial and continuous competition for highly skilled personnel. Acquisitions, workforce
reductions and changes in our business strategy may affect our ability to retain or replace key personnel, harm employee morale and productivity
or disrupt our business. Key employees may depart because of issues relating to uncertainty or a desire not to remain with us following a merger
transaction, restructuring or change in business strategy. Effective succession planning is important to our long-
term success. Failure to ensure
effective transfer of knowledge and transitions involving key employees could hinder execution of our business strategies. Finally, the loss of
any of our key executives could impair our ability to execute our business strategy or otherwise have a material adverse effect on us.
22