Earthlink 2013 Annual Report Download - page 29

Table of Contents
If we, or other industry participants, are unable to successfully defend against disputes or legal actions, we could face substantial liabilities
or suffer harm to our financial and operational prospects.
We are currently a party to various disputes, litigation or other legal proceedings arising from normal business activities, including
regulatory audits, trademark and patent infringement, billing disputes, rights of access, tax, consumer protection, employment and tort. The
result of any current or future disputes, litigation or other legal proceedings is inherently unpredictable. Defending against disputes, litigation or
other legal proceedings may involve significant expense and diversion of management's attention and resources from other matters. Due to the
inherent uncertainties of litigation, we may not prevail in these actions. In addition, our ongoing operations may subject us to litigation risks and
costs in the future. Both the costs of defending lawsuits and any settlements or judgments against us could adversely affect our results of
operations.
We are also subject to the risks associated with the resolution of various third-
party disputes, lawsuits, arbitrations and proceedings
affecting our Business Services segment. The deregulation of the telecommunications industry, the implementation of the Telecommunications
Act of 1996, the evolution of telecommunications infrastructure from time-
division multiplexing to Internet Protocol, and the distress of many
carriers in the telecommunications industry as a result of continued competitive factors and financial pressures have resulted in the involvement
of numerous industry participants in disputes, lawsuits, proceedings and arbitrations before state and federal regulatory commissions, private
arbitration organizations such as the American Arbitration Association, and courts over many issues that will be important to our financial and
operational success. These issues include the interpretation and enforcement of existing interconnection agreements and tariffs, the terms of new
interconnection agreements, operating performance obligations, intercarrier compensation, treatment of different categories of traffic (for
example, traffic originated or terminated on wireless or VoIP), the jurisdiction of traffic for intercarrier compensation purposes, the wholesale
services and facilities available to us, the prices we will pay for those services and facilities and the regulatory treatment of new technologies and
services.
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 infringe on their intellectual property rights, including patent rights, and we expect
to continue to be subject to such claims. We may be unaware of filed patent applications and of issued patents that could be related to our
products and services. Increasingly, these claims are made by patent holding companies that are not operating companies. The alleging parties
generally seek royalty payments for prior use as well as future royalty streams. Defending against disputes, litigation or other legal proceedings,
whether or not meritorious, may involve significant expense and diversion of management's attention and resources from other matters. Due to
the inherent uncertainties of litigation, we may not prevail in these actions. Both the costs of defending lawsuits and any settlements or
judgments against us could adversely affect our results of operations.
We may not be able to protect our intellectual property.
We regard our trademarks, including EarthLink, EarthLink Business, EarthLink Carrier and PeoplePC, as valuable assets to our
business. In particular, we believe the strength of these brands among existing and potential customers is important to the success of our
business. Additionally, our EarthLink, EarthLink Business, EarthLink Carrier and PeoplePC service marks, proprietary technologies, domain
names and similar intellectual property are also important to the success of our business. We principally rely upon trademark law as well as
contractual restrictions to establish and protect our technology and proprietary rights and information. We require employees and consultants
and, when possible, suppliers and distributors to sign confidentiality agreements, and we generally control access to, and distribution of, our
technologies, documentation and other proprietary information. The efforts we have taken to protect our proprietary rights may not be sufficient
or effective. Third parties may infringe or misappropriate our trademarks and similar proprietary rights. If we are unable to protect our
proprietary rights from unauthorized use, our brand image may be harmed and our business may suffer. In addition, protecting our intellectual
property and other proprietary rights is expensive and time consuming. Any increase in the unauthorized use of our intellectual property could
make it more expensive to do business and consequently harm our results of operations.
We may be unable to hire and retain sufficient qualified personnel, and the loss of any of our key executive officers could adversely affect us.
Our business depends on our ability to hire and retain key executive officers, senior management, sales, IT and other key personnel,
many of whom have significant experience in our industry and whose expertise is required to successfully transition our business into a leading
communications and IT services provider. There is substantial and continuous competition for highly skilled sales and IT personnel. Acquisitions
and workforce reductions may affect our ability to retain or replace key personnel,
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