Stamps.com 2013 Annual Report Download - page 17

Increases in payment processing fees would increase our operating expenses and adversely affect our results of operations.
Our customers pay for our services predominately using credit cards and debit cards and, to a lesser extent, by use of automated clearing house
payments. 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 that increase the fees on a cost-
per-transaction basis. If these fees for accepting payment methods increase in future periods, it would adversely affect our results of operations.
A decline in our ability to effectively bill our customers by credit card and debit card would adversely affect our results of operations.
Our ability to effectively charge our customers through credit cards and debit cards is subject to many variables, including our own billing
technology and practices, the practices and rules of payment processing companies, and the practices and rules of issuing financial institutions. If
we do not effectively charge and bill our customers in future periods through credit cards and debit cards, it would adversely affect our results of
operations.
Credit card fraud and our response to it could adversely affect our business.
We routinely receive orders placed with fraudulent credit card data. We do not carry insurance against the risk of credit card fraud, so our failure
to adequately control fraudulent credit card transactions could reduce our net revenues and our profit. We may suffer losses as a result of postage
purchases placed with fraudulent credit card data even if the associated financial institution approved payment. If we are unable to detect or
control credit card fraud, our liability for these transactions could harm our business, prospects, financial condition and results of operation.
Further, to the extent our efforts to prevent fraudulent transactions result in our inadvertent refusal to fill legitimate business requests, we would
lose the benefit of legitimate potential sales and risk the alienation of legitimate customers.
Default on the credit we may provide for printing postage to one or more of our larger customers could adversely impact our results of
operations.
As we acquire larger customers that require larger postage volumes to support their businesses, we may invoice or extend credit terms to
facilitate their access to postage and use of our services. If one or more of these customers were to default on amounts owed, it could adversely
affect our results of operations.
Third party assertions of violations of their intellectual property rights could adversely affect our business.
Substantial litigation regarding intellectual property rights exists in our industry. Third parties may currently have, or may eventually be issued,
patents upon which our products or technology infringe. Any of these third parties might make a claim of infringement against us. We may
become aware of, or we may increasingly receive correspondence claiming, potential infringement of other parties’ intellectual property rights.
We could incur significant costs and diversion of management time and resources to defend claims against us, regardless of their validity. Any
associated costs (including settlements cost, judgments and legal expenses) and business distractions could have a material adverse effect on our
business, financial condition and results of operations. In addition, litigation in which we are accused of infringement might cause product
development delays, require us to develop non-infringing technology or require us to enter into royalty or license agreements, which might not
be available on acceptable terms, or at all. If a successful claim of infringement were made against us and we could not develop non-infringing
technology or license the infringed or similar technology on a timely and cost-effective basis, our business could be significantly harmed or fail.
Any loss resulting from intellectual property litigation could severely limit our operations, cause us to pay license fees, or prevent us from doing
business.
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