Travelzoo 2010 Annual Report Download - page 45

Representatives of the State of Delaware are currently conducting an unclaimed property review of the
Company. In response to information requests in this review, the Company has provided information concerning
uncashed checks and other unclaimed property which may be in the custody of the Company. It is the Company’s
understanding that, if it holds unclaimed property of third parties whose addresses are unknown, that property may
be subject to escheat to the State of Delaware, because it is the jurisdiction of incorporation of the Company. In the
review, the Company has also been requested to provide, and has provided, information concerning the unissued
shares referred to above. No escheat claims have been asserted in respect of any such unissued shares, but it is
possible that such claims may be asserted as a result of the review. The Company is unable to predict the outcome of
the unclaimed property review.
Our internal control over financial reporting may not be effective, and our independent auditors may not
be able to certify as to the effectiveness of such internal controls, which could have a significant and
adverse effect on our business.
We are obligated to evaluate our internal control over financial reporting in order to allow management to
report on, and our independent auditors to opine on, our internal control over financial reporting, as required by
Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and regulations of the SEC, which we collectively refer
to as Section 404. In our Section 404 evaluation, we have identified areas of internal controls that may need
improvement and have instituted remediation efforts where necessary. Currently, none of our identified areas that
need improvement has been categorized as material weaknesses. We may identify conditions that may result in
significant deficiencies or material weaknesses in the future.
We may be unable to protect our registered trademark or other proprietary intellectual property rights.
Our success depends to a significant degree upon the protection of the Travelzoo brand name. We rely upon a
combination of copyright, trade secret and trademark laws and non-disclosure and other contractual arrangements
to protect our intellectual property rights. The steps we have taken to protect our proprietary rights, however, may
not be adequate to deter misappropriation of proprietary information.
We have registered the Travelzoo trademark in the U.S., Australia, Canada, China, Hong Kong, Japan, South
Korea, Taiwan, and the U.K. If we are unable to protect our rights in the mark in North America, Europe, and Asia
Pacific, where we have licensed the trademark as described above under “Overview”, a key element of our strategy
of promoting Travelzoo as a brand could be disrupted and our business could be adversely affected. We may not be
able to detect unauthorized use of our proprietary information or take appropriate steps to enforce our intellectual
property rights. In addition, the validity, enforceability, and scope of protection of intellectual property in
Internet-related industries are uncertain and still evolving. The laws of countries in which we may market our
services in the future are uncertain and may afford little or no effective protection of our intellectual property. The
unauthorized reproduction or other misappropriation of our proprietary technology could enable third parties to
benefit from our technology and brand name without paying us for them. If this were to occur, our business could be
materially adversely affected.
We may face liability from intellectual property litigation that could be costly to prosecute or defend and
distract management’s attention with no assurance of success.
We cannot be certain that our products, content and brand names do not or will not infringe valid patents,
copyrights or other intellectual property rights held by third parties. While we have a trademark for “Travelzoo,”
many companies in the industry have similar names including the word “travel”. We expect that infringement
claims in our markets will increase in number as more participants enter the markets. We may be subject to legal
proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our
business. We may incur substantial expenses in defending against these third party infringement claims, regardless
of their merit, and such claims could result in a significant diversion of the efforts of our management personnel.
Successful infringement claims against us may result in monetary liability or a material disruption in the conduct of
our business.
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