LinkedIn 2012 Annual Report Download - page 32

If we fail to maintain, protect and enhance our intellectual property rights, our business and
operating results may be harmed, and the market price of our Class A common stock could decline.
We are, and may in the future be, subject to legal proceedings and litigation, including intellectual property and
privacy disputes, which are costly to defend and could harm our business and operating results.
We are party to lawsuits and legal proceedings in the normal course of business. These matters are
often expensive and disruptive to normal business operations. We are currently facing, or may face in the
future, allegations, lawsuits and regulatory inquiries, audits and investigations regarding data privacy,
security and intellectual property infringement, including claims related to privacy, patents, publicity,
trademarks, copyrights and other rights. Litigation and regulatory proceedings, and particularly the patent
infringement and class action matters we are facing or may face, may be protracted and expensive, and
the results are difficult to predict. Over the last year, we have experienced an increase in patent litigation
involving non-practicing entities, which are expensive to defend. Additionally, as certain litigation matters
mature, costs related to those matters increase. Adverse outcomes with respect to litigation or any of
these legal proceedings may result in significant settlement costs or judgments, penalties and fines, or
require us to modify our products and features while we develop non-infringing substitutes or require us
to stop offering certain features. Additionally, we could become subject to mandatory periodic audits as a
result of regulatory proceedings, which would likely increase our regulatory compliance costs, and may
require us to change our business practices, which could negatively impact our revenue growth. Managing
legal proceedings and litigation, even if we achieve favorable outcomes, is time-consuming and diverts
management’s attention from our business.
In addition, we use open source software in our solutions and plan to use open source software in the
future. From time to time, we may face claims from others claiming ownership of open source software,
or breach of open source license terms, including a demand for release of material portions of our source
code or otherwise seeking to enforce the terms of the applicable open source license. These claims could
also result in litigation, require us to purchase a costly license, require us to establish specific open source
compliance procedures, or require us to devote additional research and development resources to change
our solutions, any of which would have a negative effect on our business and operating results.
Although the results of litigation and claims cannot be predicted with certainty, and determining
reserves for pending litigation requires significant judgment, we do not believe that the final outcome of
any individual matter that we currently face will have a material adverse effect on our business. However,
there can be no assurance that our expectations will prove correct, and even if these matters are not
resolved in our favor or without significant cash settlements, these matters, and the time and resources
necessary to litigate or, resolve them, could harm our business, our operating results, our reputation or
the market price of our Class A common stock.
If we do not continue to attract new customers, or if existing customers do not renew their subscriptions, renew
on less favorable terms, or fail to purchase additional solutions, we may not achieve our revenue projections, and
our operating results would be harmed.
In order to grow our business, we must continually attract new customers, sell additional solutions to
existing customers and reduce the level of non-renewals in our business. Our ability to do so depends in
large part on the success of our sales and marketing efforts. We do not typically enter into long-term
contracts with our customers, and even when we do, they can generally terminate their relationship with
us. We have limited historical data with respect to rates of customer renewals, upgrades and expansions,
so we may not accurately predict future trends for any of these metrics. Furthermore, unlike traditional
software companies, the nature of our products and solutions is such that customers may decide to
terminate or not renew their agreements with us without causing significant disruptions to their own
businesses.
We must demonstrate that our Talent Solutions are an important recruiting tool for enterprises and
professional organizations and that our Marketing Solutions provide them with access to an audience of
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