Zynga 2015 Annual Report Download - page 35

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actions to protect our “Zynga Poker,” “Ville,” and “With Friends” franchises against third-party uses of those intellectual property assets and brands. 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.
Ourabilitytoacquireandmaintainlicensestointellectualpropertymayaffectourrevenueandprofitability.Competitionfortheselicensesmaymakethem
moreexpensiveandincreaseourcosts.*
While most of the intellectual property we use is created by us, we have also acquired rights to proprietary intellectual property. We have also obtained rights
to use intellectual property through licenses and service agreements with third parties. We use licensed intellectual property as a creative asset in certain games
such as Looney Tunes Dash!, Hit it Rich! Slots, Wizard of Oz Slots and Black Diamond Casino and have built many of our games on proprietary source code, such
as Unity.
Proprietary licenses typically limit our use of intellectual property to specific uses and for specific time periods. Competition for licenses for creative assets
is intense. If we are unable to maintain these licenses or obtain additional licenses on reasonable economic terms or with significant commercial value, our revenue
and profitability may be adversely impacted. Competition for these licenses may also increase the advances, guarantees and royalties that we must pay to the
licensor, which could significantly increase our costs and adversely affect our profitability.
Many of our games are built on propriety source code, such as Unity. If we are unable to renew licenses to proprietary source code underlying our games, or
the terms and conditions of these licenses change at the time of renewal our business, operations and revenue could be negatively impacted. We rely on third
parties, including Unity, to maintain versions of their proprietary engines that allow us to ship our games on multiple platforms. If a third party from whom we
license source code discontinues support for one or more of these platforms, our business could be negatively impacted.
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 competitors, non-practicing entities and former employers of our personnel. Intellectual property
litigation may be protracted and expensive, and the results are difficult to predict. As the result of any court judgment or settlement, we may be obligated to cancel
the launch of a new game, stop offering a game or certain features of a game in a particular geographic region or worldwide, pay royalties or significant settlement
costs, purchase licenses or modify our games and features, or develop substitutes.
In addition, we use open source software in our games and expect to continue to use open source software in the future. From time to time, we may face
claims from companies that incorporate open source software into their products, claiming ownership of, or demanding release of, the source code, the open source
software and/or derivative works that were developed using such software, or otherwise seeking to enforce the terms of the applicable open source license. These
claims could also result in litigation, require us to purchase a costly license or require us to devote additional research and development resources to change our
games, any of which would have a negative effect on our business and operating results.
Weareinvolvedinlegalproceedingsthatmayresultinadverseoutcomes.*
We may be involved in claims, suits, government investigations, and proceedings arising in the ordinary course of our business, including actions with
respect to intellectual property claims, privacy, data protection or
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