Enom 2011 Annual Report Download - page 24

dilution. The UDRP generally does not impose liability on registrars, and the ACPA provides that registrars may not be held liable for registering or
maintaining a domain name absent a showing of bad faith intent to profit or reckless disregard of a court order by the registrars. However, we may face
liability if we fail to comply in a timely manner with procedural requirements under these rules. In addition, these processes typically require at least limited
involvement by us, and therefore increase our cost of doing business. The volume of domain name registration disputes may increase in the future as the
overall number of registered domain names increases.
Domain name registrars also face potential tort law liability for their role in wrongful transfers of domain names. The safeguards and procedures we
have adopted may not be successful in insulating us against liability from such claims in the future. In addition, we face potential liability for other forms of
“domain name hijacking,” including misappropriation by third parties of our network of customer domain names and attempts by third parties to operate
websites on these domain names or to extort the customer whose domain name and website were misappropriated. Furthermore, our risk of incurring liability
for a security breach on a customer website would increase if the security breach were to occur following our sale to a customer of an SSL certificate that
proved ineffectual in preventing it. Finally, we are exposed to potential liability as a result of our private domain name registration service, wherein we
become the domain name registrant, on a proxy basis, on behalf of our customers. While we have a policy of providing the underlying Whois information and
reserve the right to cancel privacy services on domain names giving rise to domain name disputes including when we receive reasonable evidence of an
actionable harm, the safeguards we have in place may not be sufficient to avoid liability in the future, which could increase our costs of doing business.
We may experience unforeseen liabilities in connection with our acquisition of Internet domain names or arising out of third-party domain names
included in our distribution network, which could negatively impact our financial results.
We have acquired and intend to continue to acquire in the future additional previously-owned Internet domain names. While we have a policy
against acquiring domain names that infringe on third-party intellectual property rights, including trademarks or confusingly similar business names, in some
cases, these acquired names may have trademark significance that is not readily apparent to us or is not identified by us in the bulk purchasing process. As a
result we may face demands by third-party trademark owners asserting infringement or dilution of their rights and seeking transfer of acquired Internet
domain names under the UDRP administered by ICANN or actions under the ACPA. Additionally, we display paid listings on third-party domain names and
third-party websites that are part of our distribution network, which also could subject us to a wide variety of civil claims including intellectual property
infringement.
We intend to review each claim or demand which may arise from time to time on a case-by-case basis with the assistance of counsel and we intend
to transfer any rights acquired by us to any party that has demonstrated a valid prior right or claim. We cannot, however, guarantee that we will be able to
resolve these disputes without litigation. The potential violation of third-party intellectual property rights and potential causes of action under consumer
protection laws may subject us to unforeseen liabilities including injunctions and judgments for money damages.
Our failure to register, maintain, secure, transfer or renew the domain names that we process on behalf of our customers or to provide our other services
to our customers without interruption could subject us to additional expenses, claims of loss or negative publicity that have a material adverse effect on
our business.
Clerical errors and system and process failures made by us may result in inaccurate and incomplete information in our database of domain names
and in our failure to properly register or to maintain, secure, transfer or renew the registration of domain names that we process on behalf of our customers. In
addition, any errors of this type might result in the interruption of our other services. Our failure to properly register or to maintain, secure, transfer or renew
the registration of our customers’ domain names or to provide our other services without interruption, even if we are not at fault, might result in our incurring
significant expenses and might subject us to claims of loss or to negative publicity, which could harm our business, revenue, financial condition and results of
operations.
Governmental and regulatory policies or claims concerning the domain name registration system, and industry reactions to those policies or claims, may
cause instability in the industry, disrupt our domain name registration business and negatively impact our business.
ICANN is a private sector, not for profit corporation formed in 1998 for the express purposes of overseeing a number of Internet related tasks
previously performed directly on behalf of the U.S. government, including managing the domain name registration system. ICANN has been subject to strict
scrutiny by the public and by the United States government. For example, in the United States, Congress has held hearings to evaluate ICANN’s selection
process for new top level domains. In addition, ICANN faces significant questions regarding its financial viability and efficacy as a private sector entity.
ICANN may continue
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