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informational databases and other systemic components that are necessary to manage and support our operations. We rely on a combination of
laws and contractual restrictions with employees, customers, suppliers, licensees, affiliates and other third parties to establish and protect these
proprietary rights. Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use trade secrets or copyrighted
intellectual property without authorization which, if discovered, might require legal action to correct. In addition, third parties may
independently and lawfully develop substantially similar intellectual properties.
We have generally registered and continue to apply to register, or secure by contract when appropriate, our trademarks and service marks
as they are developed and used, and reserve and register domain names as we deem appropriate. We consider the protection of our trademarks to
be important for purposes of brand maintenance and reputation. While we vigorously protect our trademarks, service marks and domain names,
effective trademark protection may not be available or may not be sought in every country in which products and services are made available,
and contractual disputes may affect the use of marks governed by private contract. Similarly, not every variation of a domain name may be
available or be registered, even if available. Our failure to protect our intellectual property rights in a meaningful manner or challenges to related
contractual rights could result in dilution of brand names and/or limit our ability to control marketing on or through the internet using our various
domain names either of which could adversely affect our business, financial condition and results of operations.
Some of our businesses have been granted patents and/or have patent applications pending with the United States Patent and Trademark
Office and/or foreign patent authorities for various proprietary technologies and other inventions. We consider applying for patents or for other
appropriate statutory protection when we develop valuable new or identify improved proprietary technologies or inventions, and will continue to
consider the appropriateness of filing for patents to protect future proprietary technologies and inventions as circumstances may warrant. The
issuance or assessment of the validity of any patent involves complex legal and factual questions, and the breadth of claims allowed is uncertain.
Accordingly, any patent application filed may not result in a patent being issued or existing or future patents may not be adjudicated valid by a
court or be afforded adequate protection against competitors with similar technology. In addition, third parties may create new products or
methods that achieve similar results without infringing upon patents that we own. Likewise, the issuance of a patent to us does not mean that our
processes or inventions will not be found to infringe upon patents or other rights previously issued to third parties.
From time to time, we are subject to legal proceedings and claims in the ordinary course of business, including claims of alleged
infringement of the trademarks, copyrights, patents and other intellectual property rights of third parties. In addition, litigation may be necessary
in the future to enforce our intellectual property rights, protect trade secrets or determine the validity and scope of proprietary rights claimed by
others. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical
resources, any of which could adversely affect our business, financial condition and results of operations. Patent litigation tends to be particularly
protracted and expensive.
Competition
HSNi brands and businesses operate in a highly competitive environment. These brands and businesses are in direct competition for
consumers with traditional offline and online retailers (both television and internet retailers), ranging from large department stores to specialty
shops, electronic retailers, direct marketing retailers, mail order and catalog companies, infomercial retailers, wholesale clubs and discount
retailers. In addition, the HSN television networks compete for access to customers and audience share with other conventional forms of
entertainment and content. The price and availability of programming for pay television systems affect the availability of distribution for HSN
television programming. Both the compensation that must be paid to pay television operators for related carriage and competition for channel
capacity and placement continues to increase. Principal competitive factors for HSNi brands and businesses include: (i) brand recognition,
(ii) value, quality and selection of merchandise, (iii) customer experience, including customer service and reliability of fulfillment and delivery
services and (iv) convenience and accessibility of sales channels.
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