Incredimail 2008 Annual Report Download - page 14

We derive and expect to continue to derive a substantial portion of our revenues from customers outside United States. Our international
sales and related operations are subject to a number of inherent risks, including risks with respect to:
Risks Related to Our Intellectual Property
If we are unable to protect our intellectual property rights, our competitive position could be harmed.
Our ability to execute our business strategy and compete depends in part upon our ability to protect our intellectual property. In 2003, we
submitted national phase patent applications in the United States, the European Community and Israel with respect to certain processes that we
employ in our products. These applications benefited from a priority date of a provisional application filed in the year 2000. One patent has been
issued in the United States under these applications to date. Our pending and future patent applications may not issue as patents or, if issued, may
not issue in a form that will be advantageous to us. Any issued patents may be challenged, invalidated or legally circumvented by third parties. We
cannot be certain that our patents will be upheld as valid and enforceable or prevent the development of competitive products. Consequently,
competitors could develop, manufacture and sell products that directly compete with our products, which could decrease our sales and diminish
our ability to compete. If our intellectual property does not adequately protect us from our competitors’ products and methods, our competitive
position could be adversely affected and we could be precluded from operating all or a portion of our business.
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In addition, we exploit our brand name Incredi by applying it to products offered through collaborations with third parties. We have
registered INCREDIMAIL as a trademark only in the United States. Our ownership and use of the Incredi brand name may be challenged,
invalidated or legally circumvented by third parties, in which case our ability to generate revenues from its exploitation will suffer.
We have registered, or have rights to, various domain names relating to our brand, including incredimail.com, incredidate.com,
incredigames.com magentic.com, photojoy.com and hiyo.com. If we fail to maintain, or to enforce our rights to these registrations, it will be
difficult for us to implement our strategy to increase recognition of our brand. Third parties have registered domain names similar to ours and if
such parties engage in a business that may be harmful to our reputation or confusing to our customers, our revenue may decline and we may incur
additional expenses in maintaining our brand.
We rely on a combination of patent and other intellectual property laws and confidentiality, non-disclosure and assignment of inventions
covenants as appropriate, with our employees and consultants, to protect and otherwise seek to control access to, and distribution of, our
proprietary information. These measures may not be adequate to protect our property from unauthorized disclosure, third-party infringement or
misappropriation. We also rely on trade secret protection for our technology, in part through confidentiality covenants with our employees,
consultants and third parties. However, these parties may breach these covenants and we may not have adequate remedies for any breach. Also,
others may learn of our trade secrets through a variety of methods. In addition, the laws of certain countries in which we sell our products may not
protect our intellectual property rights to the same extent as the laws of the United States or Israel. See
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Item 4.B Business Overview
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Intellectual
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potential loss of proprietary information due to piracy, misappropriation or laws that may be less protective of our intellectual
property rights than those of the United States;
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costs and delays associated with translating and supporting our products in multiple languages;
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foreign exchange rate fluctuations and economic instability, such as higher interest rates and inflation, which could make our
products more expensive in those countries;
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costs of compliance with a variety of laws and regulations;
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restrictive governmental actions such as trade restrictions;
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limitations on the transfer and repatriation of funds and foreign currency exchange restrictions;
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compliance with different consumer and data protection laws and restrictions on pricing or discounts;
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lower levels of adoption or use of the Internet and other technologies vital to our business and the lack of appropriate infrastructure
to support widespread Internet usage;
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lower levels of consumer spending on a per capita basis and fewer opportunities for growth in certain foreign market segments
compared to the United States;
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lower levels of credit card usage and increased payment risk;
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changes in domestic and international tax regulations; and
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geopolitical events, including war and terrorism.