NetFlix 2012 Annual Report Download - page 19

Increases in payment processing fees, changes to operating rules or the acceptance of new types of
payment methods could increase our operating expenses and adversely affect our business and results of
operations.
Our subscribers pay for our subscription services predominately using payment cards. Our acceptance of
these payment methods requires our payment of certain fees. From time to time, these fees may increase, either
as a result of rate changes by the payment processing companies or as a result of a change in our business
practices which increase the fees on a cost-per-transaction basis. Such increases may adversely affect our results
of operations.
We are subject to rules, regulations and practices governing our accepted payment methods. These rules,
regulations and practices could change or be reinterpreted to make it difficult or impossible for us to comply. If
we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and
lose our ability to accept these payment methods, and our business and results of operations would be adversely
affected.
We accept payment methods other than payment cards. As our service continues to evolve and expand
internationally, we will likely continue to explore accepting various forms of payment, which may have higher
fees and costs than our currently accepted payment methods. If more consumers utilize higher cost payment
methods, our payment costs could increase and our results of operations could be adversely impacted.
If our trademarks and other proprietary rights are not adequately protected to prevent use or
appropriation by our competitors, the value of our brand and other intangible assets may be diminished,
and our business may be adversely affected.
We rely and expect to continue to rely on a combination of confidentiality and license agreements with our
employees, consultants and third parties with whom we have relationships, as well as trademark, copyright,
patent and trade secret protection laws, to protect our proprietary rights. We may also seek to enforce our
proprietary rights through court proceedings. We have filed and we expect to file from time to time for trademark
and patent applications. Nevertheless, these applications may not be approved, third parties may challenge any
patents or trademarks issued to or held by us, third parties may knowingly or unknowingly infringe our patents,
trademarks and other proprietary rights, and we may not be able to prevent infringement or misappropriation
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, streaming technology, our recommendation and merchandising
technology, 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 that we have violated their intellectual
property rights. If we are unable to obtain sufficient rights, successfully defend our use, or develop non-
infringing technology or otherwise alter our business practices on a timely basis in response to claims against us
for infringement, misappropriation, misuse or other violation of third-party intellectual property rights, our
business and competitive position may be adversely affected. 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 searched patents relative
to our technology. Defending ourselves against intellectual property claims, whether they are with or without
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