Zynga 2015 Annual Report Download - page 34

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other players who do play fairly. These programs harm the experience of players who play fairly, may disrupt the virtual economies of our games and may reduce
the demand for virtual items. In addition, unrelated third parties attempt to scam our players with fake offers for virtual goods or other game benefits. We devote
significant resources to discover and disable these programs and activities, and if we are unable to do so quickly our operations may be disrupted, our reputation
damaged and players may stop playing our games. This may lead to lost revenue from paying players, increased cost of developing technological measures to
combat these programs and activities, legal claims relating to the diminution in value of our virtual currency and goods, and increased customer service costs
needed to respond to dissatisfied players.
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includingforspecificgamesforwhichwehaverecordedintangibleassets.*
As of December 31, 2015, we had $1.0 billion of goodwill, intangible assets and other long-lived assets. Our February 2014 acquisition of NaturalMotion
increased our reported goodwill and intangible assets. If our market capitalization declines below our net asset value or if our financial performance and/or
condition deteriorate, 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 and we recorded an asset impairment charge of $95.5 million. In addition, in the third quarter of 2013
we recorded an intangible asset impairment charge of $10.2 million related to various prior acquisitions. For more information, see Note 6—“Goodwill and Other
Intangible Assets” in the notes to the consolidated financial statements included 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, service marks, trade dress, domain names, patents, 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 copyrights, trademarks, service marks, domain names, and patents in the United States and in certain locations outside the
United States. This process can be expensive and time-consuming, may not always be successful depending on local laws or other circumstances, and we also may
choose not pursue registrations in every location depending on the nature of the project to which the intellectual property rights pertain. We may, over time,
increase our investments in protecting our creative works through increased copyright filings and our brands through increased trademark and other filings.
Likewise, 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 or licensed. 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 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. For example, we historically have brought several
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