8x8 2002 Annual Report Download - page 37

We rely in part on trademark, copyright, and trade secret law to protect our intellectual property in the United States
and abroad. We seek to protect our software, documentation, and other written materials under trade secret and
copyright law, which afford only limited protection. We also rely in part on patent law to protect our intellectual
property in the United States and internationally. As of the date of this filing we hold forty-
nine United States patents
and have a number of United States and foreign patent applications pending. We cannot predict whether such pending
patent applications will result in issued patents. We may not be able to protect our proprietary rights in the United
States or internationally (where effective intellectual property protection may be unavailable or limited), and
competitors may independently develop technologies that are similar or superior to our technology, duplicate our
technology or design around any patent of ours. We have in the past licensed and in the future expect to continue
licensing our technology to others; many of who are located or may be located abroad. There are no assurances that
such licensees will protect our technology from misappropriation. Moreover, litigation may be necessary in the future
to enforce our intellectual property rights, to determine the validity and scope of the proprietary rights of others, or to
defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of
management time and resources and could have a material adverse effect on our business, financial condition, liquidity
and operating results. Any settlement or adverse determination in such litigation would also subject us to significant
liability.
There has been substantial litigation in the semiconductor, electronics, and related industries regarding intellectual
property rights, and from time to time third parties may claim infringement by us of their intellectual property rights.
Our broad range of technology, including systems, digital and analog circuits, software, and semiconductors, increases
the likelihood that third parties may claim infringement by us of their intellectual property rights. If we were found to
be infringing on the intellectual property rights of any third party, we could be subject to liabilities for such
infringement, which could be material. We could also be required to refrain from using, manufacturing or selling
certain products or using certain processes, either of which could have a material adverse effect on our business and
operating results. From time to time, we have received, and may continue to receive in the future, notices of claims of
infringement, misappropriation or misuse of other parties' proprietary rights. There can be no assurance that we will
prevail in these discussions and actions or that other actions alleging infringement by us of third-
party patents will not
be asserted or prosecuted against the Company.
We rely upon certain technology, including hardware and software, licensed from third parties. There can be no
assurance that the technology licensed by us will continue to provide competitive features and functionality or that
licenses for technology currently utilized by us or other technology which we may seek to license in the future will be
available to us on commercially reasonable terms or at all. The loss of, or inability to maintain existing licenses could
result in shipment delays or reductions until equivalent technology or suitable alternative products could be developed,
identified, licensed and integrated, and could harm our business. These licenses are on standard commercial terms
made generally available by the companies providing the licenses. The cost and terms of these licenses individually are
not material to our business.
Continued reductions in levels of capital investment by telecommunication service providers might impact our
ability to increase revenue and prevent us from achieving profitability
The market for internet-
based communication services provided by telecommunication service providers has only
begun to emerge, and many of these service providers are still building their infrastructure and deploying their services.
These telecommunication service providers require substantial capital for the development, construction, and expansion
of their networks and the introduction of their services. Financing may not be available to telecommunication service
providers on favorable terms, if at all. The inability of our current or potential telecommunication service provider
customers to acquire and keep customers, to successfully raise needed funds, or to respond to any other trends such as
price reductions for their services or diminished demand for telecommunication services generally, could adversely
affect their operating results or cause them to reduce their capital spending programs. If our current or potential
customers are forced to defer or further curtail their capital spending programs, sales of our hosted iPBX and eSLEE
products to those telecommunication service providers and sales of our IP telephony semiconductors to manufacturers
of telecommunication equipment may be adversely affected, which would negatively impact our business, financial
condition, and results of operations. In addition, many of the industries in which telecommunication service providers
operate have experienced consolidation. The loss of one or more of our current or potential telecommunication service
provider or telecommunication equipment OEM customers, through industry consolidation or otherwise, could reduce
or eliminate our sales to such a customer and consequently harm our business, financial condition, and results of