Tucows 2015 Annual Report Download - page 29

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.
Other Risks Related to Our Business
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:
• management, communication and integration problems resulting from cultural differences and geographic
dispersion;
• 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;
• accreditation and other regulatory requirements to provide domain name registration, website hosting and other
services in foreign jurisdictions;
• competition from companies with international operations, including large international competitors and
entrenched local companies;
• 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;
• difficulties in protecting intellectual property rights in international jurisdictions;
• political and economic instability in some international markets;
• sufficiency of qualified labor pools in various international markets;
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