8x8 2004 Annual Report Download - page 33

30
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. We hold fifty-four 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, 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 us.
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.
The failure of IP networks to meet the reliability and quality standards required for voice and video
communications could render our products obsolete.
Circuit-switched telephony networks feature very high reliability, with a guaranteed quality of service. In addition,
such networks have imperceptible delay and consistently satisfactory audio quality. Emerging broadband IP
networks, such as LANs, WANs, and the internet, or emerging last mile technologies such as cable, digital
subscriber lines, and wireless local loop, may not be suitable for telephony unless such networks and technologies
can provide reliability and quality consistent with these standards.
Our products must comply with industry standards, FCC regulations, state, country-specific and
international regulations, and changes may require us to modify existing products.
In addition to reliability and quality standards, the market acceptance of telephony over broadband IP networks is
dependent upon the adoption of industry standards so that products from multiple manufacturers are able to
communicate with each other. Our VoIP telephony products rely heavily on standards such as SIP, H.323, MGCP
and Megaco to interoperate with other vendors' equipment. There is currently a lack of agreement among industry
leaders about which standard should be used for a particular application, and about the definition of the standards
themselves. These standards, as well as audio and video compression standards, continue to evolve. We also must
comply with certain rules and regulations of the Federal Communications Commission (FCC) regarding
electromagnetic radiation and safety standards established by Underwriters Laboratories, as well as similar
regulations and standards applicable in other countries. Standards are continuously being modified and replaced. As