Adobe 2014 Annual Report Download - page 24

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Additionally, we take significant measures to protect the secrecy of our confidential information and trade secrets, including
our source code. Despite these measures, as we have previously disclosed, hackers have managed to access certain of our source
code 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 enforcing our rights may be difficult or costly.
Increasing regulatory focus on privacy issues and expanding laws and regulations could impact our new business models and
expose us to increased liability.
Our industry is highly regulated, including for privacy and data security. We are also expanding our business in countries
that have more stringent data protection laws than those in the U.S. 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 customers, we collect and store anonymous and personal information derived from the activities of
end users with various channels, including traditional websites, mobile websites and applications, email interactions, direct mail,
point of sale, text messaging and call centers (collectively, “channels”). This enables us to provide such customers with reports
on aggregated anonymous or personal information from and about end-user interactions with various channels 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 end users depend in part on such customers’ adherence to privacy laws
and regulations and their use of our services in ways consistent with such end users’ 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 end users 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 adverse publicity and possible legal or other
regulatory action. In addition, some countries are considering enacting laws that would expand the scope of privacy-related
obligations required of service providers, such as Adobe, that would require additional compliance expense and increased liability.
If we fail to process transactions effectively or fail to adequately protect against disputed or potential fraudulent activities, our
revenue and earnings may be harmed.
We process a significant volume of transactions on a daily basis in both our Digital Marketing and Digital Media businesses.
Due to the size and volume of transactions that we handle, effective processing systems and controls are essential; but even the
most sophisticated systems and processes may not be effective in preventing all errors. The systems supporting our business are
comprised of multiple technology platforms that may be difficult to scale. If we are unable to effectively manage these systems
and processes, we may be unable to process customer data in an accurate, reliable and timely manner, which may harm our customer
relationships or results of operations.
Failure to manage our sales and distribution channels and third-party customer service and technical support providers
effectively could result in a loss of revenue and harm to our business.
We contract with a number of software distributors, none of which is individually responsible for a material amount of our
total net revenue for any recent period. If any single agreement with one of our distributors were terminated, we believe we could
make arrangements with new or existing distributors to distribute our products without a substantial disruption to our business;
however, any prolonged delay in securing a replacement distributor could have a negative short-term impact on our results of
operations.