Green Dot 2012 Annual Report Download - page 30

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substantial periods of time. The cost to defend, settle or otherwise resolve these matters may be significant. Further,
an unfavorable resolution of litigation, proceedings or investigations could have a material adverse effect on our
business, operating results, or financial condition. In this regard, such costs could make it more difficult to maintain
the capital, leverage and other financial commitments at levels we have agreed to with the Federal Reserve Board
and the Utah Department of Financial Institutions.
If regulatory or judicial proceedings or investigations were to be initiated against us by private or governmental
entities, adverse publicity that may be associated with these proceedings or investigations could negatively impact
our relationships with retail distributors, network acceptance members and card processors and decrease acceptance
and use of, and loyalty to, our products and related services, and could impact the price of our Class A common stock.
In addition, such proceedings or investigations could increase the risk that we will be involved in litigation. The outcome
of any such litigation is difficult to predict and the cost to defend, settle or otherwise resolve these matters may be
significant. For the foregoing reasons, if regulatory or judicial proceedings or investigations were to be initiated against
us by private or governmental entities, our business, results of operations and financial condition could be adversely
affected or our stock price could decline.
We must adequately protect our brand and our intellectual property rights related to our products and
services and avoid infringing on the proprietary rights of others.
The Green Dot brand is important to our business, and we utilize trademark registrations and other means to
protect it. Our business would be harmed if we were unable to protect our brand against infringement and its value
was to decrease as a result.
We rely on a combination of patent, trademark and copyright laws, trade secret protection and confidentiality and
license agreements to protect the intellectual property rights related to our products and services. We currently have
four patents outstanding and seven patents pending. Although we generally seek patent protection for inventions and
improvements that we anticipate will be incorporated into our products and services, there is always a chance that our
patents or patent applications could be challenged, invalidated or circumvented, or that an issued patent will not
adequately cover the scope of our inventions or improvements incorporated into our products or services. Additionally,
our patents could be circumvented by third-parties.
Recent and proposed changes to U.S. patent laws and rules may also affect our ability to protect and enforce our
intellectual property rights. For example, the recently passed Leahy-Smith America Invents Act, would transition the
manner in which patents are issued and change the way in which issued patents are challenged. The long-term impact
of these changes are unknown, but this law could cause a certain degree of uncertainty surrounding the enforcement
and defense of our issued patents, as well as greater costs concerning new and existing patent applications.
We may unknowingly violate the intellectual property or other proprietary rights of others and, thus, may be subject
to claims by third parties. These assertions may increase over time as a result of our growth and the general increase
in the pace of patent claims assertions, particularly in the United States. Because of the existence of a large number
of patents in the mobile technology field, the secrecy of some pending patents, and the rapid rate of issuance of new
patents, it is not economically practical or even possible to determine in advance whether a product or any of its
elements infringes or will infringe on the patent rights of others. Regardless of the merit of these claims, we may be
required to devote significant time and resources to defending against these claims or to protecting and enforcing our
own rights. We might also be required to develop a non-infringing technology or enter into license agreements and
there can be no assurance that licenses will be available on acceptable terms and conditions, if at all. Some of our
intellectual property rights may not be protected by intellectual property laws, particularly in foreign jurisdictions. The
loss of our intellectual property or the inability to secure or enforce our intellectual property rights or to defend
successfully against an infringement action could harm our business, results of operations, financial condition and
prospects.
We are exposed to losses from cardholder account overdrafts.
Our cardholders can incur charges in excess of the funds available in their accounts, and we may become liable
for these overdrafts. While we decline authorization attempts for amounts that exceed the available balance in a
cardholder’s account, the application of card association rules, the timing of the settlement of transactions and the
assessment of the card’s monthly maintenance fee, among other things, can result in overdrawn accounts.
Maintenance fee assessments accounted for approximately 95% of aggregate overdrawn account balances in the
year ended December 31, 2012, as compared to approximately 92% in the year ended December 31, 2011.
Maintenance fee assessment overdrafts occur as a result of our charging a cardholder, pursuant to the card’s terms
and conditions, the monthly maintenance fee at a time when he or she does not have sufficient funds in his or her
account.