Overstock.com 2005 Annual Report Download - page 15

Third parties have in the past, and may in the future, recruit our employees who have had access to our proprietary technologies,
processes and operations. These recruiting efforts expose us to the risk that such employees will misappropriate our intellectual
property.
Additional litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets or to
determine the validity and scope of the proprietary rights of others. Any litigation, regardless of outcome or merit, could result in
substantial costs and diversion of management and technical resources, any of which could materially harm our business. See "Risk
Factors."
Government Regulation
All of our services are subject to federal and state consumer protection laws including laws protecting the privacy of consumer
non-public information and regulations prohibiting unfair and deceptive trade practices. In particular, under federal and state financial
privacy laws and regulations, we must provide notice to consumers of our policies on sharing non-public information with third
parties, must provide advance notice of any changes to our policies and, with limited exceptions, must give consumers the right to
prevent sharing of their non-public personal information with unaffiliated third parties. Furthermore, the growth and demand for
online commerce could result in more stringent consumer protection laws that impose additional compliance burdens on online
companies. These consumer protection laws could result in substantial compliance costs and could interfere with the conduct of our
business.
In January 2005, we received an inquiry from the Federal Trade Commission ("FTC") regarding our shipping policies and
systems and other matters. We cooperated fully with the FTC's inquiry and in January 2006 the FTC notified us that it had terminated
its inquiry.
In many states, there is currently great uncertainty whether or how existing laws governing issues such as property ownership,
sales and other taxes, libel and personal privacy apply to the Internet and commercial online services. These issues may take years to
resolve. In addition, new state tax regulations may subject us to additional state sales and income taxes. New legislation or regulation,
the application of laws and regulations from jurisdictions whose laws do not currently apply to our business or the application of
existing laws and regulations to the Internet and commercial online services could result in significant additional taxes on our
business. These taxes could have an adverse effect on our cash flows and results of operations. Furthermore, there is a possibility that
we may be subject to significant fines or other payments for any past failures to comply with these requirements.
Employees
As of December 31, 2005, we had 620 full-time employees, including 109 in customer service and fraud prevention, 145 in order
fulfillment, 93 in information technology and Website production, 38 in marketing, 166 in merchandising (including auctions and
travel), 34 in accounting and finance, and 35 in our executive and administrative department. We have never had a work stoppage, and
none of our employees are represented by a labor union. We consider our employee relationships to be positive.
ITEM 1A. RISK FACTORS
Any investment in our securities involves a high degree of risk. Investors should consider carefully the risks and uncertainties
described below, and all other information in this Form 10-K and in any reports we file with the SEC after we file this Form 10-K,
before deciding whether to purchase or hold our securities. Additional risks and uncertainties not currently known to us or that we
currently deem immaterial may also become important factors that may harm our business. The occurrence of any of the following
risks could harm our business. The trading price of our securities could decline due to any of these risks and uncertainties, and
investors may lose part or all of their investment.
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