NetFlix 2002 Annual Report Download - page 42

without substantial expense to us. If the protection of our proprietary rights is inadequate to prevent use or appropriation by third parties, the value of our brand and other intangible assets
may be diminished, competitors may be able to more effectively mimic our service and methods of operations, the perception of our business and service to subscribers and potential
subscribers may become confused in the marketplace and our ability to attract subscribers may be adversely affected.
Intellectual property claims against us could be costly and result in the loss of significant rights related to, among other things, our Web site, our recommendation service, title
selection processes and marketing activities.
Trademark, copyright, patent and other intellectual property rights are important to us and other companies. Our intellectual property rights extend to our technology, business processes and
the content on our Web site. We use the intellectual property of third parties in merchandising our products and marketing our service through contractual and other rights. From time to time,
third parties allege our violation of intellectual property rights. If there is any claim against us for infringement, misappropriation, misuse or other violation of third party intellectual property
rights, and we are unable to obtain sufficient rights or develop non−infringing intellectual property or otherwise alter our business practices, as appropriate, on a timely basis, our business
and competitive position may be affected adversely. Many companies are devoting significant resources to developing patents that could potentially affect many aspects of our business.
There are numerous patents that broadly claim means and methods of conducting business on the Internet. We have not exhaustively searched patents relative to our technology. If we are
forced to defend ourselves against intellectual property claims, whether they are with or without merit or are determined in our favor, we may face costly litigation, diversion of technical and
management personnel, inability to use our current Web site or our recommendation service or inability to market our service or merchandise our products. As a result of a dispute, we may
have to develop non−infringing technology, enter into royalty or licensing agreements adjust our merchandizing or marketing activities or take other action to resolve the claims. These
actions, if required, may be unavailable on terms acceptable to us, costly or unavailable.
If we are unable to protect our domain names, our reputation and brand could be affected adversely.
We currently hold various domain names relating to our brand, including Netflix.com. Failure to protect our domain names could affect adversely our reputation and brand, and make it more
difficult for users to find our Web site and our service. The acquisition and maintenance of domain names generally are regulated by governmental agencies and their designees. The
regulation of domain names in the United States may change in the near future. Governing bodies may establish additional top−level domains, appoint additional domain name registrars or
modify the requirements for holding domain names. As a result, we may be unable to acquire or maintain relevant domain names. Furthermore, the relationship between regulations
governing domain names and laws protecting trademarks and similar proprietary rights is unclear. We may be unable to prevent third parties from acquiring domain names that are similar to,
infringe upon or otherwise decrease the value of our trademarks and other proprietary rights.
Because our business is accessed over the Internet, if the Internet infrastructure is not developed or maintained, we will lose subscribers.
The Internet may not become a viable commercial marketplace for many potential subscribers due to inadequate development of network infrastructure and enabling technologies that
address consumer concerns about:
• network performance;
• security;
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