8x8 2014 Annual Report Download - page 24

intellectual property rights. For example, on May 2, 2008, we received a letter from AT&T Intellectual Property, L.L.C., or AT&T IP,
expressing the belief that we must license a specified patent for use in our 8x8 broadband telephone service, as well as suggesting that we obtain
a license to its portfolio of MPEG-4 patents for use with our video telephone products and services. At the same time, we began an evaluation of
whether AT&T IP's affiliated entities may need to license any of our patents or other intellectual property. We have continued to engage in
discussions with AT&T IP to explore a mutually agreeable resolution of the parties' respective assertions regarding these intellectual property
issues. We are unable at this time to state whether we will enter into any license or cross-license agreements with AT&T IP or whether we
ultimately anticipate any material effects on our operating results or financial condition as a consequence of these matters.
Certain technology necessary for us to provide our services may, in fact, be patented by other parties either now or in the future. If such
technology were held under patent by another person, we would have to negotiate a license for the use of that technology, which we may not be
able to negotiate at a price that is acceptable or at all. The existence of such a patent, or our inability to negotiate a license for any such
technology on acceptable terms, could force us to cease using such technology and offering products and services incorporating such technology.
We have recently been named as defendants in four patent infringement lawsuits. On February 22, 2011, we were named a defendant in a
lawsuit, Bear Creek Technologies, Inc. v. 8x8, Inc. et al., along with 20 other defendants. On October 25, 2011, we were named a defendant in a
lawsuit, Klausner Technologies, Inc. v. Oracle Corporation et al., along with 30 other defendants. On March 31, 2014, we were named a
defendant in a lawsuit, CallWave Communications LLC v. 8x8, Inc. On April 23, 2014, we were named but not served as a defendant in a
lawsuit, TQP Development LLC v. 8x8, Inc. On April 30, 2014 (and before any service of the complaint), TQP Development filed papers to
dismiss this lawsuit and other lawsuits that were filed on or about the same time. If we are found to be infringing on the intellectual property
rights of any third party in these lawsuits or other claims and proceedings that may be asserted against us in the future, we could be subject to
monetary 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. Furthermore, lawsuits like these may require significant
time and expense to defend, may divert management's attention away from other aspects of our operations and, upon resolution, may have a
material adverse effect on our business, results of operations, financial condition and cash flows. More information regarding the four pending
suits is provided under Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2014.
Inability to protect our proprietary technology would disrupt our business.
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 March 31, 2014, we had been
awarded 92 United States patents, more than 60 of which we currently hold and which we expect to expire between 2014 and 2032. We have
additional United States and foreign patents pending. We cannot predict whether such pending patent applications will result in issued patents,
and if they do, whether such patents will effectively protect our intellectual property. The intellectual property rights we obtain may not be
sufficient to provide us with a competitive advantage, and could be challenged, invalidated, infringed or misappropriated. 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 attempt to further protect our proprietary technology and content by requiring our employees and consultants to enter into confidentiality and
assignment of inventions agreements and third parties to enter into nondisclosure agreements. These agreements may not effectively prevent
unauthorized use or disclosure of our confidential information, intellectual property or technology and may not provide an adequate remedy in
the event of unauthorized use or disclosure of our confidential information, intellectual property or technology.
Litigation may be necessary in the future to enforce our intellectual property rights, to determine the validity and scope of our proprietary rights
or the 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.
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