WeightWatchers 2011 Annual Report Download - page 35

Third parties may infringe on our brand and other intellectual property rights, which may have an
adverse impact on our business.
We currently rely on a combination of trademark, copyright, trade secret, patent and other intellectual
property laws and confidentiality procedures to establish and protect our proprietary rights, including our brand.
If we fail to successfully enforce our intellectual property rights, the value of our brand, services and products
could be diminished and our business may suffer. Our precautions may not prevent misappropriation of our
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 or maintained by 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
or privacy concerns.
Unauthorized users who penetrate our information security could misappropriate proprietary or customer
information or data 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
17