Adobe 2013 Annual Report Download - page 23

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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 lawsuits and
other disputes, we may not prevail in the future. Third-party intellectual property disputes, including those initiated by non-
practicing entities, 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, in some cases to fulfill contractual obligations with our customers. Any of these occurrences
could significantly 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, access and use of software and
intellectual property through a variety of techniques, preventing unauthorized use or infringement of our rights is inherently
difficult. We actively combat software piracy as we enforce our intellectual property rights, but we nonetheless lose significant
revenue due to illegal use of our software. If piracy activities continue at historical levels or 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. Despite these measures, hackers have managed to access certain of our source code in the past and may obtain
access in the future. If unauthorized disclosure of our source code occurs through security breach, cyber-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 cause us to lose customers and 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.
Our new business models are more highly regulated, including 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 these new business models, our
liability exposure, compliance requirements and costs associated with privacy issues will likely increase. Privacy laws globally
are changing and evolving. Governments, privacy advocates and class action attorneys are increasingly scrutinizing how companies
collect, process, use, store, share or transmit personal data. New laws and industry self-regulatory codes have been enacted and
more are being considered that may affect our ability to reach current and prospective customers, to understand how our products
and services are being used, to respond to customer requests allowed under the laws, and to implement our new business models
effectively. These new laws and regulations would similarly affect our competitors as well as our customers. 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, class action lawsuits, 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. Additionally, both laws regulating privacy, as well as
third-party products addressing perceived privacy concerns, could affect the functionality of and demand for our products, thereby
harming our revenues.
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 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 regulations and our
reputation among the public body of website visitors depend in part on such customers' adherence to privacy laws and regulations
and their use of our services in ways consistent with such visitors' expectations. We also rely on representations made to us by
customers that their own use of our services and the information they provide to us via our services do not violate any applicable
privacy laws, rules and regulations or their own privacy policies. We ask customers to represent to us that they provide their website
visitors the opportunity to “opt-out” of the information collection associated with our services, as applicable. We do not formally
audit such customers to confirm compliance with these representations. If these representations are false or if such customers do
not otherwise comply with applicable privacy laws, we could face potentially adverse publicity and possible legal or other regulatory
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