Incredimail 2013 Annual Report Download - page 35

We enter into licensing arrangements with third parties for the use of software components, graphic, sound and multimedia content
integrated into our products.
We have registered: (i) "Perion" as a trademark in the United States, Israel and the European Community (a community trademark); (ii)
"IncrediMail" and "PhotoJoy" as trademarks in the United States, the European Community (a community Trademark) and China and we have a
pending application for IncrediMail in Israel that has already been allowed; (iii) "Smilebox Teeth Design" in the United States; (iv) "Smilebox"
in Australia, Canada, China, France, Germany, Japan, Korea, United Kingdom and the United States; and (v) "SWEETPACKS" and
"SWEETIM" in the United States.
In addition, we are the owner of a U.S. trademark application for “Codefuel”.
All employees and consultants are required to execute confidentiality covenants in connection with their employment and consulting
relationships with us. In addition, our consulting agreements contain assignment and waiver provisions relating to the consultant’
s rights in
respect of inventions. However, there can be no assurance that these arrangements will provide us with adequate protection. Although our
employment agreements contain assignment and waiver provisions relating to the employee’
s rights in respect of inventions created within the
course of their employment with us, including in respect of "Service Inventions", as defined under the Israeli Patents Law, 5727-
1967, we cannot
guarantee that such waiver of rights to receive compensation for Service Inventions will be upheld by Israeli courts, due to a recent ruling by the
Israeli Supreme Court which left the validity of such a waiver to further judicial review.
Competition
The markets in which we are active are subject to intense competition. We compete with many other companies offering solutions for
online publishers and developers, including search services and other software in conjunction with changing a user’s default search settings.
As a major part of our revenues stem from our offering of search properties, we compete with search engine providers themselves such
as Google, Microsoft, Yahoo, Ask and others. We also compete with many other companies offering consumer downloadable software, albeit
totally different software, utilizing the same strategy, to offer their search properties, such as Interactive Corporation, AOL, Blucora, AVG
Technologies and others.
The market ClientConnect operates in --
providing distribution, monetization and analytical solutions to software developers and
publishers --
is very competitive as well, with companies such as Google, Interactive Corporation, Blucora and others providing competing
solutions.
Many of our current and potential competitors have significantly greater financial, research and development, back-
end analytical
systems, manufacturing, and sales and marketing resources than we have. These competitors could use their greater financial resources to
acquire other companies to gain even further enhanced name recognition and market share, as well as to develop new technologies, enhanced
systems and analytical capabilities, products or features that could effectively compete with our existing solutions, products and search services.
Demand for our solutions, products and search services could be diminished by solutions, products, services and technologies offered by
competitors, whether or not their solutions, products, services and technologies are equivalent or superior.
Finally, our ability to attract developers is largely dependent on our ability to pay higher rates to our publishers and developers, our
success in creating strong commercial relationships with developers that have successful software, websites or distribution channels, and our
ability to differentiate our distribution, monetization, and optimization tools from those of our competitors, primarily through our Life Cycle
Management platform.
Government Regulation
We are subject to a number of U.S. federal and state and foreign laws and regulations that affect companies conducting business on the
Internet. The manner in which existing laws and regulations will be applied to the Internet in general, and how they will relate to our business in
particular is unclear. Accordingly, we cannot be certain how existing laws will be interpreted or how they will evolve in areas such as user
privacy, data protection, content, use of “cookies”, access changes, “net neutrality”, pricing, advertising, distribution of “spam”,
intellectual
property, distribution, protection of minors, consumer protection, taxation and online payment services.
In particular, we are subject to U.S. federal and state laws regarding copyright infringement, privacy and protection of user data, many
of which are subject to regulation by the Federal Trade Commission. These laws include the Digital Millennium Copyright Act, which aims to
reduce the liability of online service providers for listing or linking to third-
party websites that include materials that infringe copyrights or the
rights of others, and other federal laws that restrict online service providers’
collection of user information on minors as well as distribution of
materials deemed harmful to minors. Many U.S. states, such as California, are adopting statutes that require online service providers to report
certain security breaches of personal data and to report to consumers when personal data will be disclosed to direct marketers. There are also a
number of legislative proposals pending before the U.S. Congress and various state legislative bodies concerning data protection which could
affect us.
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