WeightWatchers 2009 Annual Report Download - page 32

intellectual property, particularly in foreign countries where laws or law enforcement practices may not protect
our proprietary rights as fully as in the United States. Any legal action that we may bring to protect our brand and
other intellectual property could be unsuccessful and expensive and could divert management’s attention from
other business concerns. In addition, legal standards relating to the validity, enforceability and scope of
protection of intellectual property, especially in Internet-related businesses, are uncertain and evolving. We
cannot assure you that these evolving legal standards will sufficiently protect our intellectual property rights in
the future.
We may in the future be subject to intellectual property rights claims.
Third parties may in the future make claims against us alleging infringement of their intellectual property
rights. Any intellectual property claims, regardless of merit, could be time-consuming and expensive to litigate or
settle and could significantly divert management’s attention from other business concerns. In addition, if we were
unable to successfully defend against such claims, we may have to pay damages, stop selling the service or
product or stop using the software, technology or content found to be in violation of a third party’s rights, seek a
license for the infringing service, product, software, technology or content or develop alternative non-infringing
services, products, software, technology or content. If we cannot license on reasonable terms, develop
alternatives or stop using the service, product, software, technology or content for any infringing aspects of our
business, we may be forced to limit our service and product offerings. Any of these results could reduce our
revenues and our ability to compete effectively, increase our costs or harm our business.
Any failure of our technology or systems to perform satisfactorily could result in an adverse impact on our
business.
We rely on software, hardware, network systems and similar technology that is either developed by us or
licensed from third parties to operate our websites and subscription offerings and to maintain the recurring billing
system associated with certain of our commitment plans, such as Monthly Pass. As much of this technology is
complex, there may be future errors, defects or performance problems, including when we update our technology
to expand and enhance our capabilities. Our technology may malfunction or suffer from defects that become
apparent only after extended use. In addition, our operations depend on our ability to protect our information
technology systems against damage from fire, power loss, water, earthquakes, telecommunications failures,
vandalism and other malicious acts and similar unexpected adverse events. Interruptions in our websites or
offerings could result from unknown hardware defects, insufficient capacity or the failure of our website hosting
and telecommunications providers to provide continuous and uninterrupted service. We do not have a fully
redundant system that includes an instant back-up hosting facility. As a result of these possible defects or
problems, our websites, our subscription products or the recurring billing system associated with certain of our
commitment plans could be rendered unreliable or be perceived as unreliable by customers. Any failure of our
technology or systems could result in an adverse impact on our business.
Our reputation and the appeal of our services and product offerings may be harmed by security breaches.
Unauthorized users who penetrate our information security could misappropriate proprietary or customer
information or cause interruptions to the subscription offerings on our websites. As a result, it may become
necessary to expend significant additional amounts of capital and resources to protect against, or to alleviate,
problems caused by unauthorized users. These expenditures, however, may not prove to be a timely remedy
against unauthorized users who are able to penetrate our information security. In addition to purposeful security
breaches, the inadvertent transmission of computer viruses could adversely affect our computer systems and, in
turn, harm our business.
An increasing number of states require that customers be notified if a security breach results in the
disclosure of their personal financial account or other information. Other states and governmental entities are
considering such “notice” laws. In addition, other public disclosure laws may require that material security
breaches be reported. If we experience a security breach and such notice or public disclosure is required in the
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