Incredimail 2009 Annual Report Download - page 19

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If it appears necessary or desirable, we may seek to obtain licenses for intellectual property rights that we are allegedly infringing, may
infringe or desire to use. Although holders of these types of intellectual property rights often offer these licenses, we cannot assure you that
licenses will be offered or that the terms of any offered licenses will be acceptable to us. Our failure to obtain a license for key intellectual
property rights from a third party for technology or content, sound or graphic used by us could cause us to incur substantial liabilities and to
suspend the development and sale of our products. Alternatively, we could be required to expend significant resources to re-
design our products
or develop non-infringing technology. If we are unable to re-design our products or develop non-
infringing technology, our revenues could
decrease and we may not be able to execute our business strategy.
We may become involved in litigation not only as a result of alleged infringement of a third-party’
s intellectual property rights, but also
to protect our own intellectual property rights. If we do not prevail in any third-
party action for infringement, we may be required to pay
substantial damages and be prohibited from using intellectual property essential to our products.
We may also become involved in litigation in connection with the brand name rights associated with our Company name or the names
of our products. We do not know whether others will assert that our Company name or brand name infringes their trademark rights. In addition,
names we choose for our products may be claimed to infringe names held by others. If we have to change the name of our Company or products,
we may experience a loss in goodwill associated with our brand name, customer confusion and a loss of sales. Any lawsuit, regardless of its
merit, would likely be time-consuming, expensive to resolve and require additional management time and attention.
Risks Related to Our Industry
The Internet as a medium for commerce and communication is subject to uncertainty and there could be a shift in communication
platforms away from email.
The Internet and electronic communication industry is rapidly evolving, as new means for electronic communication are offered to the
public. Our ability to execute our business strategy is dependent upon the continued predominance of email as a means of electronic
communication and upon the continued use of the Internet.
Although email software programs and services and instant messaging programs and services currently enjoy a large market, the
development and consumer acceptance of other means of electronic communication, such as text messaging over phone networks, chat-
boards,
blogs and web-
based social networks, could result in a substantial decrease in the size of this market, in which case our revenues could decrease
and our products could become obsolete.
There is direct competition between web-based software and downloaded software.
There are different advantages and disadvantages to web-based software as compared to downloaded software. Currently, web-
based
software seems to be growing at a faster rate than downloaded software. Our business is currently reliant on the continued prevalence of
downloaded software. If there were to be a more dramatic shift to web-
based software this could cause a decrease in the distribution of our
software and subsequently in our revenues.
The Internet and Internet companies are providing an increasing number of services for free.
The internet and internet based companies are providing an increasing number of services for free, including email clients and anti-
spam software and services. A substantial part of our revenues comes from selling software products and services, currently accounting for
approximately 25% of our revenues. We attribute part of the decline in our revenues from the sale of products and services to this trend. Should
this trend accelerate or even continue for a prolonged period, this would cause our revenues from product sales and services to decrease even
more.
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