8x8 2016 Annual Report Download - page 26

analog circuits, software, and semiconductors, increases the likelihood that third parties may claim infringement by us of their 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 two 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 November 25, 2015, we were named a defendant in the suit alleging infringement of a
patent which expired in 2012. This suit is 2-Way Computing, Inc. (2-Way) v. 8x8, Inc. Each of these actions is described in more detail under Part I, Item 3, "Legal
Proceedings". 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.
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 have additional United States and
foreign patent applications 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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