Green Dot 2015 Annual Report Download - page 26

20
eight patents outstanding and ten 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 Leahy-Smith America Invents Act transitions the manner in which patents
are issued and changes 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 customer accounts.
Fraudulent activity involving our products may lead to customer disputed transactions, for which we may be liable
under banking regulations and payment network rules. Our fraud detection and risk control mechanisms may not
prevent all fraudulent or illegal activity. To the extent we incur losses from disputed transactions, our business, results
of operations and financial condition could be materially and adversely affected.
Additionally, 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 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. Our remaining overdraft exposure arises primarily from late-posting. A late-post occurs when a merchant
posts a transaction within a payment network-permitted timeframe but subsequent to our release of the authorization
for that transaction, as permitted by card association rules. Under card association rules, we may be liable for the
amount of the transaction even if the cardholder has made additional purchases in the intervening period and funds
are no longer available on the card at the time the transaction is posted.
We consider overdrawn account balances to be our receivables due from cardholders. We maintain reserves to
cover the risk that we may not recover these receivables due from our cardholders, but our exposure may increase
above these reserves for a variety of reasons, including our failure to predict the actual recovery rate accurately. To
the extent we incur losses from overdrafts above our reserves or we determine that it is necessary to increase our
reserves substantially, our business, results of operations and financial condition could be materially and adversely
affected.
An impairment charge of goodwill or other intangibles could have a material adverse impact on our financial
condition and results of operations.
Because we have grown in part through acquisitions, our net goodwill and intangible assets represent a significant
portion of our consolidated assets. Our net goodwill and intangible assets were $473.8 million as of December 31,
2015. Under accounting principles generally accepted in the United States, or U.S. GAAP, we are required to test the
carrying value of goodwill and intangible assets at least annually or sooner if events occur that indicate impairment
could exist. These events or circumstances could include a significant change in the business climate, including a
significant sustained decline in a reporting unit’s fair value, legal and regulatory factors, operating performance
indicators, competition and other factors.