Adobe 2015 Annual Report Download - page 24

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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 United States, and such laws may be inconsistent across jurisdictions
and are subject to evolving and differing interpretations. Privacy laws, including laws enforcing a “right to be forgotten” by
consumers are changing and evolving globally. Governments, privacy advocates and class action attorneys are increasingly
scrutinizing how companies collect, process, use, store, share and 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. Any perception of our practices, products or services 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 purporting to address privacy concerns,
could affect the functionality of and demand for our products and services, thereby harming our revenue.
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. 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 consumers depend in part on our customers’ adherence to privacy laws and regulations and their use of
our services in ways consistent with such consumers’ expectations. We also rely on contractual 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 contractually obligate customers to represent to us that they
provide their consumers 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 our
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.
In the past we have relied on the U.S.-European Union and the U.S.-Swiss Safe Harbor Frameworks, as agreed to by the
U.S. Department of Commerce and the European Union (“EU”) and Switzerland as a means to legally transfer European personal
information from Europe to the United States. However, on October 6, 2015, the European Court of Justice invalidated the U.S.-
EU Safe Harbor framework and the Swiss data protection authorities later invalidated the U.S.-Swiss Safe Harbor framework. As
a result, we have been establishing alternate legitimate means of transferring personal data from the European Economic Area to
the United States. The legitimacy of these alternate means are subject to differing interpretations among various European
jurisdictions. The requirements or rulings of these jurisdictions may reduce demand for our services, restrict our ability to offer
services in certain locations, impact our customers’ ability to deploy our solutions in Europe, or subject us to sanctions, including
fines and a prohibition on data transfers, by EU data protection regulators. Furthermore, the European Court of Justice’s decision
may result in different European data protection regulators applying differing standards for the transfer of personal data, which
could result in increased regulation, cost of compliance and limitations on data transfer for us and our customers. These developments
could harm our business, financial condition and results of operations.
We may incur losses associated with currency fluctuations and may not be able to effectively hedge our exposure.
Because our products are distributed and used globally, our operating results are subject to fluctuations in foreign currency
exchange rates. We attempt to mitigate a portion of these risks through foreign currency hedging, based on our judgment of the
appropriate trade-offs among risk, opportunity and expense. We have established a program to partially hedge our exposure to
foreign currency exchange rate fluctuations for various currencies. We regularly review our hedging program and make adjustments
as necessary based on the factors discussed above. Our hedging activities may not offset more than a portion of the adverse financial
impact resulting from unfavorable movement in foreign currency exchange rates, which could adversely affect our financial
condition or results of operations.