Tucows 2013 Annual Report Download - page 12

from liability for certain activities of their customers, such as posting of defamatory or obscene content, unless the
online service provider is participating in the unlawful conduct. Notwithstanding the general protections from liability
under the CDA, we may nonetheless be forced to defend ourselves from claims of liability covered by the CDA,
resulting in an increased cost of doing business.
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The Digital Millennium Copyright Act of 1998, or DMCA, provides recourse for owners of copyrighted material who
believe that their rights under U.S. copyright law have been infringed on the Internet. Under this statute, we generally
are not liable for infringing content posted by third parties. However, if we receive a proper notice from a copyright
owner alleging infringement of its protected works by web pages for which we provide hosting services, and we fail
to expeditiously remove or disable access to the allegedly infringing material, fail to post and enforce a digital rights
management policy or a policy to terminate accounts of repeat infringers, or otherwise fail to meet the requirements
of the safe harbor under the statute, the owner may seek to impose liability on us.
Although established statutory law and case law in these areas to date generally have shielded us from liability for
customer activities, court rulings in pending or future litigation may serve to narrow the scope of protection afforded us under
these laws. In addition, laws governing these activities are unsettled in many international jurisdictions, or may prove
difficult or impossible for us to comply with in some international jurisdictions. Also, notwithstanding the exculpatory
language of these bodies of law, we may be embroiled in complaints and lawsuits which, even if ultimately resolved in our
favor, add cost to our doing business and may divert management’s time and attention. Finally, other existing bodies of law,
including the criminal laws of various states, may be deemed to apply or new statutes or regulations may be adopted in the
future, any of which could expose us to further liability and increase our costs of doing business.
Domain name registrars also face potential tort law liability for their role in wrongful transfers of domain names.
The safeguards and procedures we have adopted may not be successful in insulating us against liability from such claims in
the future. In addition, we face potential liability for other forms of “domain name hijacking,” including misappropriation by
third parties of our network of customer domain names and attempts by third parties to operate websites on these domain
names or to extort the customer whose domain name and website were misappropriated. Furthermore, our risk of incurring
liability for a security breach on a customer website would increase if the security breach were to occur following our sale to
a customer of an SSL certificate that proved ineffectual in preventing it. Finally, we are exposed to potential liability as a
result of our private domain name registration service, wherein we become the domain name registrant, on a proxy basis, on
behalf of our customers. While we have a policy of providing the underlying Whois information and reserve the right to
cancel privacy services on domain names giving rise to domain name disputes including when we receive reasonable
evidence of an actionable harm, the safeguards we have in place may not be sufficient to avoid liability in the future, which
could increase our costs of doing business.
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The international nature of our business exposes us to certain business risks that could limit the effectiveness of our
growth strategy and cause our results of operations to suffer.
Expansion into international markets is an element of our growth strategy. Introducing and marketing our services
internationally, developing direct and indirect international sales and support channels and managing foreign personnel and
operations will require significant management attention and financial resources. We face a number of risks associated with
expanding our business internationally that could negatively impact our results of operations, including:
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management, communication and integration problems resulting from cultural differences and geographic dispersion;
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compliance with foreign laws, including laws regarding liability of online resellers for activities of customers and
more stringent laws in foreign jurisdictions relating to the privacy and protection of third-party data;
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accreditation and other regulatory requirements to provide domain name registration, website hosting and other
services in foreign jurisdictions;
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competition from companies with international operations, including large international competitors and entrenched
local companies;
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to the extent we choose to make acquisitions to enable our international expansion efforts, the identification of
suitable acquisition targets in the markets into which we want to expand;
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difficulties in protecting intellectual property rights in international jurisdictions;