Enom 2014 Annual Report Download - page 24

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We are subject to risks related to the third party credit card payment processing solution integrated with our websites. If our third
party payment processors fail to be in compliance with applicable credit card rules and regulations, we may be required to migrate
to an alternate payment processor, experience transaction downtime during the migration and lose customers.
Many of our online marketplace customers pay amounts owed to us using a credit card or debit card. For credit and debit card
payments, we pay payment processing fees in addition to interchange and other fees, which may increase over time and raise our
operating expenses and adversely affect our net income. We are also subject to payment card association operating rules, certification
requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible
for us to comply. We believe we and our payment processing service providers are compliant in all material respects with the Payment
Card Industry Data Security Standard, which incorporates Visa’s Cardholder Information Security Program and MasterCard’s Site
Data Protection standard. However, there is no guarantee that such compliance will be maintained or that compliance will prevent
illegal or improper use of our systems that are integrated with our payment processing providers. If either of our third party payment
processors fails to be in compliance with applicable credit card rules and regulations, we may be required to migrate to an alternate
payment processor which could result in transaction downtime during the migration and a loss of customers, either of which could
have a material adverse effect on our business, financial condition and results of operations.
If we do not adequately protect our intellectual property rights, our competitive position and business may suffer.
Our intellectual property, consisting of trade secrets, trademarks, service marks, patents and copyrights, is, in the aggregate,
important to our business. We rely on a combination of trade secret, trademark, copyright and patent laws in the United States and
other jurisdictions together with contractual provisions and technical measures to protect our proprietary rights. We rely more heavily
on trade secret protection than patent protection. To protect our trade secrets, we control access to our proprietary systems and
technology, including our platforms, and we enter into confidentiality and invention assignment agreements with our employees and
consultants, as well as confidentiality and non-disclosure agreements with other third parties. We face risks related to our intellectual
property including that:
• our intellectual property rights will not provide competitive advantages to us;
• because of the relatively high cost we would experience in registering all of our copyrights with the United States
Copyright Office, we generally do not register the copyrights associated with our content;
• our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes may
be limited by our agreements with third parties;
• our intellectual property rights may not be enforced in jurisdictions where competition is intense or where legal protection
is weak;
• any of the patents, trademarks, copyrights, trade secrets or other intellectual property rights that we presently employ in
our business could lapse or be invalidated, circumvented, challenged or abandoned;
• competitors will design around our protected systems and technology; or
• we may lose the ability to assert our intellectual property rights against others.
Effective protection of our trade secrets, trademarks, service marks, copyrights and patents may not be available in all countries
where we currently operate or in which we may operate in the future. Policing unauthorized use of our proprietary rights can be
difficult and costly. In addition, it may be necessary to enforce or protect our intellectual property rights through litigation or to defend
litigation brought against us, which could result in substantial costs and diversion of resources and management attention and could
adversely affect our business, even if we are successful on the merits.
Some of our software and systems contain open source software, which may pose risks to our proprietary software and solutions.
We use open source software in our software and systems and will use open source software in the future. The licenses
applicable to open source software typically require that the source code subject to the license be made available to the public and that
any modifications or derivative works to open source software continue to be licensed under open source licenses. From time to time,
we may face claims from third parties demanding the release or license of the open source software or derivative works that we
developed using such software (which could include our proprietary source code), claiming infringement of their intellectual property
rights, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and
could require us to purchase a costly license, publicly release the affected portions of our source code, be limited in the licensing of