Chegg 2013 Annual Report Download - page 79

• any of the patents, trademarks, copyrights, trade secrets or other intellectual property or proprietary
rights that we presently employ in our business will not lapse or be invalidated, circumvented,
challenged or abandoned; or
• we will not lose the ability to assert our intellectual property or proprietary rights against or to license
our intellectual property or proprietary rights to others and collect royalties or other payments.
If we pursue litigation to assert our intellectual property or proprietary rights, an adverse decision in any of
these legal actions could limit our ability to assert our intellectual property or proprietary rights, limit the value of
our intellectual property or proprietary rights or otherwise negatively impact our business, financial condition
and results of operations. If the protection of our intellectual property and proprietary rights is inadequate to
prevent use or misappropriation by third parties, the value of our brand and other intangible assets may be
diminished, competitors may be able to more effectively mimic our service and methods of operations, the
perception of our business and service to customers and potential customers may become confused in the
marketplace and our ability to attract customers may be adversely affected.
We are a party to a number of third-party intellectual property license agreements. For example, in 2012, we
entered into an agreement with a textbook publisher that provides access to textbook solutions content for our
Chegg Study service over a five-year term, for which we paid an upfront license fee. In addition, we have
agreements with certain eTextbook publishers under which we incur non-refundable fees at the time we provide
students access to an eTextbook. We cannot guarantee that the third-party intellectual property we license will
not be licensed to our competitors or others in our industry. In the future, we may need to obtain additional
licenses or renew existing license agreements. We are unable to predict whether these license agreements can be
obtained or renewed on acceptable terms, or at all. Any failure to obtain or renew such third-party intellectual
property license agreements on commercially competitive terms could adversely affect our business and financial
results.
We are, and may in the future be, subject to intellectual property claims, which are costly to defend and could
harm our business and operating results.
From time to time, third parties have alleged and are likely to allege in the future that we or our business
infringes, misappropriates or otherwise violates their intellectual property or proprietary rights. Many companies,
including various “non-practicing entities” or “patent trolls,” are devoting significant resources to developing or
acquiring patents that could potentially affect many aspects of our business. There are numerous patents that
broadly claim means and methods of conducting business on the Internet. We have not exhaustively searched
patents related to our technology.
Third parties may initiate litigation against us without warning. Others may send us letters or other
communications that make allegations without initiating litigation. We have in the past and may in the future
receive such communications, which we assess on a case-by-case basis. We may elect not to respond to the
communication if we believe it is without merit or we may attempt to resolve disputes out-of-court by electing to
pay royalties or other fees for licenses. If we are forced to defend ourselves against intellectual property claims,
whether they are with or without merit or are determined in our favor, we may face costly litigation, diversion of
technical and management personnel, inability to use our current website or inability to market our service or
merchandise our products. As a result of a dispute, we may have to develop non-infringing technology, enter into
licensing agreements, adjust our merchandizing or marketing activities or take other action to resolve the claims.
These actions, if required, may be unavailable on terms acceptable to us, or may be costly or unavailable. If we
are unable to obtain sufficient rights or develop non-infringing intellectual property or otherwise alter our
business practices, as appropriate, on a timely basis, our reputation or brand, our business and our competitive
position may be affected adversely and we may be subject to an injunction or be required to pay or incur
substantial damages and/or fees.
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