Chegg 2014 Annual Report Download - page 66

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Furthermore, we cannot guarantee that:
• our intellectual property and proprietary rights will provide competitive advantages to us;
• our competitors or others will not design around our intellectual property or proprietary rights;
• our ability to assert our intellectual property or proprietary rights against potential competitors or to settle current
or future disputes will not be limited by our agreements with third parties;
• our intellectual property and proprietary rights will be enforced in jurisdictions where competition may be
intense or where legal protection may be weak;
• 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 merchandising 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.
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