Earthlink 2004 Annual Report Download - page 21

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The protection of our trademarks, service marks, copyrights, patents, trade secrets, proprietary technologies and intellectual property may
require the expenditure of significant financial and managerial resources. Moreover, we cannot be certain that the steps we take to protect these
assets will adequately protect our rights or that others will not independently develop or otherwise acquire equivalent or superior technology or
other intellectual property rights. Such events could substantially diminish the value of our technology and property which could adversely
affect our business.
We may be accused of infringing upon the intellectual property rights of third parties, which is costly to defend and could limit our ability to
use certain technologies in the future.
From time to time, third parties have alleged that we infringed on their proprietary rights. We have been subject to, and expect to continue
to be subject to, claims and legal proceedings regarding alleged infringement by us of the patents, trademarks and other intellectual property
rights of third parties. None of these claims has had an adverse effect on our ability to market and sell and support our Internet access services.
Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, injunctions against us
or the imposition of damages that we must pay. We may need to obtain licenses from third parties who allege that we have infringed their
rights, but such licenses may not be available on terms acceptable to us or at all. In addition, we may not be able to obtain or utilize on terms
which are favorable to us, or at all, licenses or other rights with respect to intellectual property we do not own in providing and supporting our
service offerings. Any of these could result in increases in our operating expenses or could limit or reduce the number of our service offerings.
Government regulations could force us to change our business practices.
Changes in the regulatory environment regarding the Internet could cause our revenues to decrease and/or our costs to increase. Currently,
ISPs are considered “information service” providers rather than “telecommunications”
providers, and therefore are not directly regulated by the
FCC or any other governmental agency, other than with respect to regulations that govern businesses generally, such as regulations related to
consumer protection. Accordingly, regulations that apply to telephone companies and other telecommunications common carriers do not apply
to us. The FCC, however, is examining the regulatory status of ISPs. We operate our services throughout the U.S., and regulatory authorities at
the state level may seek to regulate aspects of our activities as telecommunications services, including Internet access and voice services (such
as VoIP). As a result, we could become subject to FCC and state regulation as Internet access services and telecommunications services
converge. If the regulatory status of ISPs changes or if regulatory-related charges are imposed on ISPs or on dial-up consumers to access the
Internet, our business may be adversely affected.
The tax treatment of activities on or relating to the Internet is currently unsettled. A number of proposals have been made at the federal,
state and local levels and by foreign governments that could impose taxes on the online sale of goods and services and other Internet activities.
Future federal and state laws imposing taxes on the provision of goods and services over the Internet could make it substantially more
expensive to operate our business.
We may not realize the benefits we are seeking from the SK-EarthLink joint venture transaction or other investment activities as a result of
lower than predicted revenues or subscriber levels of the companies in which we invest, larger funding requirements for those companies or
otherwise.
We have made equity investments in several companies, and we have committed to invest an aggregate of $220 million over the next three
years in a joint venture with SK Telecom Co., Ltd. to offer wireless voice and data services to U.S. consumers. We expect the use of cash for
the formation of the joint venture with SK Telecom Co., Ltd. (to be called SK-EarthLink) and the financing of SK-EarthLink’s near term
operations to adversely affect our cash position. In addition, we expect SK-EarthLink to incur losses due to the start-up nature of its operations,
and we expect to be required to include our proportionate
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