Redbox 2011 Annual Report Download - page 20

We may be unable to adequately protect or enforce our patents and other proprietary rights.
Our success depends, in part, on our ability to protect our intellectual property and maintain the proprietary
nature of our technology through a combination of patents, licenses and other intellectual property arrangements,
without infringing the proprietary rights of third parties. We have over 110 United States and international
patents related to aspects of self-service coin-counting, including patents regarding machine networking, fraud
avoidance and voucher authentication, and over 10 United States and international patents related to aspects of
our Redbox business, including patents regarding kiosk security and inventory management. We also have
additional patents and patent applications pending in the United States and several foreign jurisdictions related to
our kiosks technologies. In addition, we may apply for or obtain (through development, acquisition or otherwise)
additional patents regarding technologies used in our businesses.
Our patents may not be held valid if challenged, our patent applications may not be issued, and other parties may
claim rights in or ownership of our patents and other proprietary rights. Since many patent applications in the
United States are not publicly disclosed until 18 months after the patent has been applied for, others may have
filed applications, which, if issued as patents, could cover our products or technology. Patents issued to us may
be circumvented or fail to provide adequate protection of our technologies. Our competitors might independently
develop or patent technologies that are substantially equivalent or superior to our technologies. Further, since
patent terms are limited, other parties may begin practicing our patented technologies when our related patents
expire. For example, certain United States patent rights based on an early patent application primarily relating to
our coin-counting business will expire in September 2012 and a patent relating to Redbox’s “Rent and Return
Anywhere” feature expired in June 2010.
In addition, certain parties may assert claims of patent infringement or misappropriation against us based on
current or pending United States or foreign patents, copyrights or trade secrets, or contracts. If such claims were
successful, our business could be harmed. Defending ourselves and our retailers against these types of claims,
regardless of their merits, could require us to incur substantial costs and divert the attention of key personnel.
Parties making these types of claims may be able to obtain injunctive or other equitable relief, which could
effectively block or impair our ability to provide our DVD or coin-counting products and services or other
products and services in the United States or abroad. Such claims could also result in an award of substantial
damages. If third parties have, or obtain, proprietary rights that our products infringe, we may be unable to obtain
necessary licenses from others at a reasonable cost or at all. In addition, if we instigate litigation to enforce our
patents or protect our other proprietary rights, or to determine the validity and scope of other parties’ proprietary
rights, such litigation could cause us to spend significant financial and management resources. We also rely on
trademarks, copyrights, trade secrets and other intellectual property to develop and maintain our competitive
position. Although we protect our intellectual property in part by confidentiality agreements with our employees,
consultants, vendors and corporate partners, these parties may breach these agreements. We may have inadequate
remedies for any such breach and our trade secrets may otherwise become known or be discovered independently
by our competitors. The failure to protect our intellectual property rights effectively or to avoid infringing the
intellectual property rights of others, as well as unfavorable rulings or settlements, could seriously harm our
business, financial condition and results of operations.
We may be unable to attract new retailers and penetrate new markets and distribution channels.
In order to increase our Redbox, coin-counting and other kiosk installations, we need to attract new retailers and
develop operational efficiencies that make it feasible for us to penetrate lower density markets or new
distribution channels, such as coin-counting kiosks in banks and credit unions. We may be unable to attract new
retailers or drive down costs relating to the manufacture, installation or servicing of Redbox, coin-counting and
other kiosks to levels that would enable us to operate profitably in lower density markets or penetrate new
distribution channels. If we are unable to do so, our future financial performance could be adversely affected.
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