Incredimail 2009 Annual Report Download - page 29

To date, we have relied mainly on “viral growth,” arising from recipients of our users’
emails clicking on the link at the bottom of
emails sent with IncrediMail
®
Xe and then downloading our products and from word-of-
mouth. In addition, during 2008 we employed
traditional marketing strategies, consisting primarily of online advertising, which efforts were met to our satisfaction. These efforts were
employed to assist in the initial market penetration of our HiYo product in the latter part of 2008. Having achieved the objectives originally set
out and in light of the new market conditions and our focus on profitability, in 2009 we were able to scale back our marketing efforts. We have
designed our products to address users’
aversion to spam, spyware and other perceived offensive Internet marketing tools. To date, we have not
been substantially affected by the growing number of installations by Internet users of “filter” software programs that allow them to block “
pop
up”
advertisements or to prevent installation of software components that act or are perceived as spying agents. The growth of our revenues
would be adversely affected if our products, while not doing any of these things, were subject to being “filtered” by consumers.
We have typically experienced stronger sales in the first and fourth quarters, principally because our products are purchased in holiday
sales in December or in the after-holiday sales in January. This is in addition to the general seasonality of the Internet as well as e-
commerce
being more active in the winter months. However, as search generated revenues account for a growing and now dominant portion of our
revenues, the seasonality of our revenues has decreased.
As of December 31, 2009 we had 19 employees in our sales and marketing department.
Intellectual Property
We rely on a combination of patent, copyright, trademark and trade secret laws and confidentiality and invention assignment
agreements to protect our intellectual property rights.
Most of the components of our software products were developed solely by us. We have licensed certain components of our software,
such as a speller function, from third parties. Except for our agreement with Commtouch Ltd. (described below), all of these licenses entailed a
one-
time fee or are freeware. We believe that these components are not material to the overall performance of our software and may be replaced
without significant difficulty.
In 2001, we submitted patent applications in the United States, Europe and Israel for the following two inventions:
In July 2006, a patent was awarded in the US for the first invention; the second US patent application was abandoned in 2009.
In 2007 an international application was filed for the invention "interactive message editing system and method". This application was
filed in the National Phase in the USA, Europe and China.
We enter into licensing arrangements with third parties for the use of graphic, sound and multimedia content integrated into our
products.
We have registered INCREDIMAIL as a trademark in the United States and the European Community and filed an application for this
mark in China on March 3, 2009. The mark in China is pending examination. In addition, we have registered PHOTOJOY as a trademark in the
USA and filed applications for this mark in the EC and China on September 9, 2008 and February 24, 2009, respectively. The EC trademark is
presently under opposition proceedings and the Chinese mark is pending examination. All other trademarks, trade names and service marks
appearing in this annual report are the property of their respective owners.
All professional employees and technical consultants are required to execute confidentiality covenants in connection with their
employment and consulting relationships with us. We also require them to agree to disclose and assign to us all inventions conceived in
connection with their services to us. However, there can be no assurance that these arrangements will be enforceable or that they will provide us
with adequate protection.
JunkFilter Plus was developed using an anti-
spam software development kit developed by Commtouch Ltd. Under our December 2004
agreement with Commtouch, Commtouch granted us a nonexclusive right and license to copy the software development kit and related software
and documentation for purposes of further development or modification in connection with the design, development and sale of products that
integrate the spam identification and classification services of Commtouch’
s Detection Center, and to sell products incorporating such software
and documentation. Under the agreement, we pay Commtouch an annual fee for each customer who purchases JunkFilter Plus
based on the
number of purchasers. The agreement had a one-year initial term, beginning with the commercial launch date of the JunkFilter Plus
in July 2005
and was last extended for another two years, ending July 2010. Commtouch will continue to provide customers with accessibility to its software
and our integrated products following termination of the agreement, and the licenses granted to our customers will also survive such termination.
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system and method for visual feedback of command execution in electronic mail systems; and
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system and method for intelligent transmission of digital content embedded in electronic mail messages.
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