Overstock.com 2005 Annual Report Download - page 24

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Our business and reputation may be harmed by the listing or sale of pirated, counterfeit or illegal items by third parties, and
by intellectual property litigation.
We have received in the past, and we anticipate we will receive in the future, communications alleging that certain items listed or
sold through our Websites infringe third-party copyrights, trademarks and trade names or other intellectual property rights or that we
have otherwise infringed third parties' past, current or future intellectual property rights. For example, in October 2003, Tiffany
(NJ) Inc. and Tiffany and Company filed a complaint against us in the United States District Court for the Southern District of New
York alleging that we have distributed counterfeit and otherwise unauthorized Tiffany product in violation of federal copyright and
trademark law and related state laws. In addition, in January 2005, Tiffany filed additional complaints against us asserting similar
claims. See "Legal Proceedings" for additional information regarding our lawsuits with Tiffany and other third parties.
We may be unable to prevent third parties from listing unlawful goods, and we may be subject to allegations of civil or criminal
liability for unlawful activities carried out by third parties through our Websites. In the future, we may implement measures to protect
against these potential liabilities that could require us to spend substantial resources and/or to reduce revenues by discontinuing certain
service offerings. Any costs incurred as a result of liability or asserted liability relating to the sale of unlawful goods or the unlawful
sale of goods could harm our revenues, business, prospects, financial condition and results of operations.
Resolving litigation or claims regarding patents or other intellectual property, whether meritorious or not, could be costly, time-
consuming, cause service delays, divert our management and key personnel from our business operations, require expensive or
unwanted changes in our methods of doing business or require us to enter into costly royalty or licensing agreements, if available. As a
result, these claims could harm our business.
Negative publicity generated as a result of the foregoing could damage our reputation, harm our business and diminish the value
of our brand name.
Gradient Analytics and Rocker Partners, L.P. Litigation
In August 2005 we filed an unfair business practice lawsuit against Gradient Analytics, Rocker Partners, L.P. and others, alleging
that the defendants have conspired to denigrate Overstock's business for personal profit. In October 2005 we filed an amended
complaint alleging additional causes of action and articulating in greater detail the allegations against the defendants. Overstock's
President, Dr. Patrick Byrne, has appeared on nationally syndicated television programs and elsewhere to discuss the litigation. The
use of management's time and attention in connection with the litigation and related matters may reduce the time management is able
to spend on other aspects of our business, which may have adverse effects on other aspects of our business. To the extent that any such
adverse effects exceed any benefits we may realize from pursuing the litigation, our business, prospects, financial condition and
results of operation may suffer.
We may be liable if third parties misappropriate our customers' personal information.
If third parties are able to penetrate our network security or otherwise misappropriate our customers' personal information or
credit card information, or if we give third parties improper access to our customers' personal information or credit card information,
we could be subject to liability. This liability could include claims for unauthorized purchases with credit card information,
impersonation or other similar fraud claims. This liability could also include claims for other misuses of personal information,
including unauthorized marketing purposes. These claims could result in litigation. Liability for misappropriation of this information
could adversely affect our business. In addition, the Federal Trade Commission and state agencies have been investigating various
Internet companies regarding their use of
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