Zynga 2012 Annual Report Download - page 30

We may be required to record impairment related to our goodwill, intangible assets or other long-lived assets if
our market capitalization declines below our net asset value or if our financial performance and/or condition
deteriorates.
As of December 31, 2012, we had $724.4 million of goodwill, intangible assets and other long-lived
assets. If our market capitalization continues to decline below our net asset value or if our financial performance
and/or condition deteriorates, we may have to impair our goodwill, intangible assets or other long-lived assets,
which could adversely impact our results of operations and financial position. For example, in the third quarter of
2012, we made the decision to discontinue the development of certain games associated with technology and
other intangible assets previously acquired from OMGPOP, Inc. and we recorded an asset impairment charge of
$95.5 million. For more information, see Note 6 – “Goodwill and Other Intangible Assets” in the notes to the
consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Failure to protect or enforce our intellectual property rights or the costs involved in such enforcement could
harm our business and operating results.
We regard the protection of our trade secrets, copyrights, trademarks, trade dress, domain names and other
product rights as critical to our success. We strive to protect our intellectual property rights by relying on federal,
state and common law rights, as well as contractual restrictions. We enter into confidentiality and invention
assignment agreements with our employees and contractors and confidentiality agreements with parties with
whom we conduct business in order to limit access to, and disclosure and use of, our proprietary information.
However, these contractual arrangements and the other steps we have taken to protect our intellectual property
may not prevent the misappropriation of our proprietary information or deter independent development of similar
technologies by others.
We pursue the registration of our domain names, copyrights, trademarks, and service marks in the United
States and in certain locations outside the United States. We are seeking to protect our trademarks, copyrights,
patents and domain names in multiple jurisdictions, a process that is expensive and time-consuming and may not
be successful or which we may not pursue in every location. We may, over time, increase our investment in
protecting our innovations through increased patent filings that are expensive and time-consuming and may not
result in issued patents that can be effectively enforced. The Leahy-Smith America Invents Act (the “Leahy-
Smith Act”) was adopted in September 2011. The Leahy-Smith Act includes a number of significant changes to
United States patent law, including provisions that affect the way patent applications will be prosecuted, which
could be detrimental to investors, and may also affect patent litigation. The United States Patent and Trademark
Office is currently developing regulations and procedures to govern administration of the Leahy-Smith Act, and
many of the substantive changes to patent law associated with the Leahy-Smith Act will not become effective
until March 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the
operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties
and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued
patents, all of which could harm our business.
Litigation may be necessary to enforce our intellectual property rights, protect our trade secrets or determine
the validity and scope of proprietary rights claimed by others. Any litigation of this nature, regardless of outcome
or merit, could result in substantial costs, adverse publicity or diversion of management and technical resources,
any of which could adversely affect our business and operating results. If we fail to maintain, protect and
enhance our intellectual property rights, our business and operating results may be harmed.
We are, and may in the future be, subject to intellectual property disputes, which are costly to defend and
could require us to pay significant damages and could limit our ability to use certain technologies in the
future.
From time to time, we have faced, and we expect to face in the future, allegations that we have infringed the
trademarks, copyrights, patents and other intellectual property rights of third parties, including from our
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