Chegg 2013 Annual Report Download - page 80

In addition, we use open source software in connection with certain of our products and services.
Companies that incorporate open source software into their products have, from time to time, faced claims
challenging the ownership of open source software and/or compliance with open source license terms. As a
result, we could be subject to suits by parties claiming ownership of what we believe to be open source software
or noncompliance with open source licensing terms. Some open source software licenses require users who
distribute or use open source software as part of their software to publicly disclose all or part of the source code
to such software and/or make available any derivative works of the open source code on unfavorable terms or at
no cost. Any requirement to disclose our proprietary source code or pay damages for breach of contract could
have a material adverse effect on our business, financial condition and results of operations.
Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets
and proprietary information.
We have devoted substantial resources to the development of our intellectual property and proprietary
rights. In order to protect our intellectual property and proprietary rights, we rely in part on confidentiality
agreements with our employees, book vendors, licensees, independent contractors and other advisors. These
agreements may not effectively prevent disclosure of confidential information and may not provide an adequate
remedy in the event of unauthorized disclosure of confidential information. In addition, others may
independently discover trade secrets and proprietary information, and in such cases we could not assert any trade
secret rights against such parties. Costly and time-consuming litigation could be necessary to enforce and
determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could
adversely affect our competitive business position.
If we are unable to protect our domain names, our reputation and brand could be adversely affected.
We currently hold various domain names relating to our brand, including Chegg.com. Failure to protect our
domain names could affect adversely our reputation and brand and make it more difficult for students to find our
website, our content and our services. The acquisition and maintenance of domain names generally are regulated
by governmental agencies and their designees. The regulation of domain names in the United States may change
in the near future. Governing bodies may establish additional top-level domains, appoint additional domain name
registrars or modify the requirements for holding domain names. As a result, we may be unable to acquire or
maintain relevant domain names. Furthermore, the relationship between regulations governing domain names
and laws protecting trademarks and similar intellectual property and proprietary rights is unclear. We may be
unable to prevent third parties from acquiring and using domain names that are similar to, infringe upon or
otherwise decrease the value of our brand name, trademarks or other intellectual property or proprietary rights.
Our wide variety of accepted payment methods subjects us to third-party payment processing-related risks.
We accept payments from students using a variety of methods, including credit cards, debit cards and
PayPal. As we offer new payment options to students, we may be subject to additional regulations, compliance
requirements and incidents of fraud. For certain payment methods, including credit and debit cards, we pay
interchange and other fees, which may increase over time and raise our operating costs and lower our profit
margins. For example, we have in the past experienced higher transaction fees from our third-party processors as
a result of chargebacks on credit card transactions.
We rely on third parties to provide payment processing services, including the processing of credit cards and
debit cards. If these companies become unwilling or unable to provide these services to us, our business could be
disrupted. We are also subject to payment card association operating rules, certification requirements and rules
governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for
us to comply. If we fail to comply with these rules or requirements, we may be subject to additional fines and
higher transaction fees and lose our ability to accept credit and debit card payments from our students, process
electronic funds transfers or facilitate other types of online payments, and our business and operating results
could be adversely affected.
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