Adobe 2011 Annual Report Download - page 39

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• potential delay in customer and distributor purchasing decisions due to uncertainty about the direction of our product
and service offerings; and
• potential incompatibility of business cultures.
Mergers and acquisitions of high technology companies are inherently risky, and ultimately, if we do not complete an
announced acquisition transaction or integrate an acquired business successfully and in a timely manner, we may not realize the
benefits of the acquisition to the extent anticipated.
We may incur substantial costs enforcing or acquiring intellectual property rights and defending against third-party claims as a
result of litigation or other proceedings.
In connection with the enforcement of our own intellectual property rights, the acquisition of third-party intellectual property
rights, or disputes relating to the validity or alleged infringement of third-party intellectual property rights, including patent rights,
we have been, are currently and may in the future be subject to claims, negotiations or complex, protracted litigation. Intellectual
property disputes and litigation are typically very costly and can be disruptive to our business operations by diverting the attention
and energies of management and key technical personnel. Although we have successfully defended or resolved past litigation and
disputes, we may not prevail in any ongoing or future litigation and disputes. Third-party intellectual property disputes could
subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us
from licensing certain of our products or offering certain of our services, subject us to injunctions restricting our sale of products
or services, cause severe disruptions to our operations or the markets in which we compete, or require us to satisfy indemnification
commitments with our customers including contractual provisions under various license arrangements and service agreements.
In addition, we may incur significant costs in acquiring the necessary third-party intellectual property rights for use in our products.
Any of these occurrences could seriously harm our business.
We may not be able to protect our intellectual property rights, including our source code, from third-party infringers or unauthorized
copying, use or disclosure.
Although we defend our intellectual property rights and combat unlicensed copying and use of software and intellectual
property rights through a variety of techniques, preventing unauthorized use or infringement of our rights is inherently difficult.
We actively pursue software piracy as part of our enforcement of our intellectual property rights, but we nonetheless lose significant
revenue due to illegal use of our software. If piracy activities increase, it may further harm our business.
Additionally, we take significant measures to protect the secrecy of our confidential information and trade secrets, including
our source code. If unauthorized disclosure of our source code occurs through security breach or attack, or otherwise, we could
potentially lose future trade secret protection for that source code. The loss of future trade secret protection could make it easier
for third parties to compete with our products by copying functionality, which could adversely affect our revenue and operating
margins. We also seek to protect our confidential information and trade secrets through the use of non-disclosure agreements with
our customers, contractors, vendors and partners. However there is a risk that our confidential information and trade secrets may
be disclosed or published without our authorization, and in these situations it may be difficult and/or costly for us to enforce our
rights.
Increasing regulatory focus on privacy issues and expanding laws and regulations could impact our new business models and
expose us to increased liability.
We are transitioning to new business models that are more highly regulated for privacy and data security. We are also
expanding these new models in countries that have more stringent data protection laws than those in the U.S. With this transition,
our liability exposure, compliance requirements and costs associated with privacy issues will likely increase. Privacy laws globally
are changing and evolving. Governments are increasingly scrutinizing how companies collect, process, use, store or transmit
personal data. New laws may come into effect that would require us to obtain explicit consent to collect or use a broad range of
customer data. This requirement may affect our ability to reach current and prospective customers, to understand how our products
and services are being used, and to implement our new business models effectively. These new laws and regulations would similarly
affect our competitors. Any perception of our practices or products as an invasion of privacy, whether or not consistent with
current regulations and industry practices, may subject us to public criticism, reputational harm or claims by regulators, industry
groups or other third parties, all of which could disrupt our business and expose us to increased liability.
On behalf of certain of our customers using some of our services, we collect and store information derived from the
activities of website visitors, which may include anonymous and/or personal information. This enables us to provide such customers
with reports on aggregated anonymous or personal information from and about the visitors to their websites in the manner
specifically directed by each such individual customer. Federal, state and foreign governments and agencies have adopted or are
considering adopting laws regarding the collection, use and disclosure of this information. Our compliance with privacy laws and
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