Digital River 2002 Annual Report Download - page 16

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Many of our competitors have, and new potential competitors may have, more experience developing Internet-based software services and
electronic commerce solutions, larger technical staffs, larger customer bases, more established distribution channels and customer relationships,
greater brand recognition and greater financial, marketing and other resources than us. In addition, competitors may be able to develop services
that are superior to our services, achieve greater customer acceptance or have significantly improved functionality as compared to our existing
and future products and services. Our competitors may be able to respond more quickly to technological developments and changes in
customers’ needs. Our inability to compete successfully against current and future competitors could cause our revenue to decline.
Intellectual Property
We regard the protection of our trademarks, copyrights, trade secrets and other intellectual property as critical to our success. We rely on a
combination of patent, copyright, trademark, service mark and trade secret laws and contractual restrictions to protect our proprietary rights. We
have entered into confidentiality and invention assignment agreements with our employees and contractors, and nondisclosure agreements with
parties with whom we conduct business, in order to limit access to and disclosure of our proprietary information. These contractual
arrangements and the other steps taken by us to protect our intellectual property may not prevent misappropriation of our technology or deter
independent third-party development of similar technologies. Thus, we also seek to -protect our proprietary position by filing U.S. and foreign
patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business.
Proprietary rights relating to our technologies will be protected from unauthorized use by third parties only to the extent they are covered by
valid and enforceable patents or are effectively maintained as trade secrets. We currently have six U.S. patents issued with 12.5 to 13.5 years
remaining prior to expiration. We pursue the registration of our trademarks and service marks in the U.S. and internationally. We currently have
16 U.S. registered trademarks and four trademark applications pending in the U.S., 25 registered trademarks in the European Union and other
countries and five trademark applications pending in the European Union and other countries. Effective trademark, service mark, copyright and
trade secret protection may not be available in every country in which our services are made available online.
The steps we have taken to protect our proprietary rights may be inadequate and third parties may infringe or misappropriate our trade secrets,
trademarks and similar proprietary rights. Any significant failure on our part to protect our intellectual property could make it easier for our
competitors to offer similar services and thereby adversely affect our market opportunities. In addition, litigation may be necessary in the future
to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others.
Litigation could result in substantial costs and diversion of management and technical resources.
Employees
As of March 1, 2003, we employed 481 people. We also employ independent contractors and other temporary employees. None of our
employees are represented by a labor union, and we consider our employee relations to be good. Competition for qualified personnel in our
industry is intense, particularly among software development and other technical staff. We believe that our future success will continue to
depend, in part, on our continued ability to attract, hire and retain qualified personnel.