Stamps.com 2001 Annual Report Download - page 10

Our service saves customers cost in many ways. First, it cleanses all addresses for mailings sent using our service so postage is not wasted on
undeliverable mail. Second, it avoids wasted postage by calculating the exact amount of postage that is needed depending on mail class, mail
form, weight and destination address. Third, the software provides the ability to track and control postage expenditures in a small office using
cost codes. Finally, the monthly service fees we charge are less than a traditional small business postage meter. Our service fees are 80% or
more less expensive than the most popular small business postage meter.
Overall, we may not be able to maintain a competitive position against current or future competitors as they enter the markets in which we
compete. This is particularly true with respect to competitors with greater financial, marketing, service, support, technical, intellectual property
and other resources than us. Failure to maintain a competitive position within the market could seriously harm our business, financial condition
and results of operations. For further discussion of the competitive risks, see "Risk Factors--If we are unable to compete successfully,
particularly against large, traditional providers of postage products like Pitney Bowes, our revenues and operating results will suffer."
Our Internet Postage Service Technology
Our Internet Postage service technology is comprised of the following key components:
System Architecture. Our servers are located in a high-security, data center and operate with internally developed security software. We intend
to internally support our web page by the end of the second quarter of 2002. These servers create the data used to generate information-based
indicia. These servers also process postage purchases using secure technology that meets US Postal Service security requirements. Our service
currently uses a Windows-based client application, which supports a variety of label and envelope options and a wide range of printers. In
addition, our application employs an internally-developed user authentication mechanism for additional security.
Transaction Processing. Our transaction processing servers are a combination of secure, commercially available and internally-developed
technologies that are designed to provide secure and reliable transactions. Our system implements hardware to meet government standards for
security and data integrity. The performance and scalability of our Internet Postage system is designed to allow many users to process postage
transactions through our Web site.
Database Processing. Our database servers are designed and built with industry-leading database technologies and can be scaled easily as
needed.
Research and Development. Our research and development expenditures were $7.4 million, $33.1 million and $12.6 million in 1999, 2000 and
2001, respectively.
Our Intellectual Property
We rely on a combination of patent, trade secret, copyright and trademark laws and contractual restrictions to establish and to protect our
intellectual property rights in products, services, know-how and information. We have 39 issued US patents, 68 pending US patent applications,
11 international patents and 28 pending international patent applications. We also have a number of registered and unregistered trademarks. We
plan to apply for more patents in the future.
Despite efforts to protect our intellectual property rights, we face substantial uncertainty regarding the impact that other parties' intellectual
property positions will have on our business. In particular, Pitney Bowes has sent formal comments to the US Postal Service asserting that
intellectual property of Pitney Bowes related to postage metering and systems would be infringed by products meeting the requirements of the
Information Based Indicia Program's specifications. Furthermore, in June 1999, Pitney Bowes filed two separate lawsuits in the
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2002. EDGAR Online, Inc.