NetFlix 2015 Annual Report Download - page 16

our intellectual property rights, and we may not be able to prevent infringement or misappropriation without
substantial expense to us. If the protection of our intellectual property rights is inadequate to prevent use or
misappropriation 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 members and potential members may become confused in the marketplace, and our
ability to attract members may be adversely affected.
We currently hold various domain names relating to our brand, including Netflix.com. Failure to protect our
domain names could adversely affect our reputation and brand and make it more difficult for users to find our
Web site and our service. We may be unable, without significant cost or at all, 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.
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
merit or are determined in our favor, results in costly litigation and diversion of technical and management
personnel. It also may result in our inability to use our current Web site, streaming technology, our
recommendation and merchandising technology 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 merchandising or marketing activities or take other actions to resolve the claims. These
actions, if required, may be costly or unavailable on terms acceptable to us.
We are engaged in legal proceedings that could cause us to incur unforeseen expenses and could occupy a
significant amount of our management’s time and attention.
From time to time, we are subject to litigation or claims that could negatively affect our business operations
and financial position. As we have grown, we have seen a rise in the number of litigation matters against us.
These matters have included patent infringements as well as consumer and securities class actions, each of which
are typically expensive to defend. Litigation disputes could cause us to incur unforeseen expenses, could occupy
a significant amount of our management’s time and attention and could negatively affect our business operations
and financial position.
We may seek additional capital that may result in stockholder dilution or that may have rights senior to
those of our common stockholders.
From time to time, we may seek to obtain additional capital, either through equity, equity-linked or debt
securities. The decision to obtain additional capital will depend on, among other things, our business plans,
operating performance and condition of the capital markets. If we raise additional funds through the issuance of
equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the
rights of our common stock, and our stockholders may experience dilution.
12