Overstock.com 2015 Annual Report Download - page 32
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Any such difficulties could have a material adverse effect on our business.
Other parties have claimed and may claim that we infringe their intellectual property rights. We have been and are subject to, and expect to continue
to be subject to, legal claims of alleged infringement of the intellectual property rights of third parties. The ready availability of damages, royalties and the
potential for injunctive relief has increased the defense litigation costs of patent infringement claims, especially those asserted by third parties whose sole or
primary business is to assert such claims. Such claims, even if not meritorious, may result in significant expenditure of financial and managerial resources,
and the payment of damages or settlement amounts. Additionally, we may become subject to injunctions prohibiting us from using software or business
processes we currently use or may need to use in the future, or requiring us to obtain licenses from third parties when such licenses may not be available on
financially feasible terms or terms acceptable to us or at all. In addition, we may not be able to obtain on favorable terms, or at all, licenses or other rights with
respect to intellectual property we do not own in providing e-commerce services to other businesses and individuals under commercial agreements. Any such
difficulties could have a material adverse effect on our business.
We have received in the past, and we anticipate we will receive in the future, communications alleging that items offered or sold through our
Website infringe third party copyrights, trademarks and trade names or other intellectual property rights or that we have otherwise infringed third parties’
past, current or future intellectual property rights. We may be unable to prevent third parties from offering and selling unlawful goods, and we may be subject
to allegations of civil or criminal liability for unlawful activities carried out by third parties through our Website. We may implement measures in an effort to
protect against these potential liabilities that could require us to spend substantial resources and/or to reduce revenues by discontinuing certain service
offerings. Any costs incurred as a result of liability or asserted liability relating to the sale of unlawful goods or the unlawful sale of goods could harm our
business. Resolving litigation or claims regarding patents or other intellectual property, whether meritorious or not, could be costly, time-consuming, cause
service delays, divert our management and key personnel from our business operations, require expensive or unwanted changes in our methods of doing
business or require us to enter into costly royalty or licensing agreements, if available. As a result, these claims and any negative publicity generated as a
result of any of the foregoing could damage our reputation, diminish the value of our brand name, and have a material adverse effect on our business.
In August 2015, a subsidiary of Medici acquired the assets and business of a financial technology ("fintech") company and in January 2016 Medici
closed the acquisitions of two registered broker-dealers (the “BDs” or our “broker-dealer subsidiaries”) that were affiliated with the fintech company. Medici
subsequently hired all or substantially all of the employees of the fintech company. However, Medici does not otherwise have any experience with the
operation of a fintech company or of a registered broker-dealer, and will be dependent upon the new employees for the expertise necessary to operate the
fintech company and the registered broker dealers. Further, Medici, the fintech company and the broker-dealers have developed proprietary blockchain
software and related expertise relating to the use of the blockchain in connection with a system for the public trading of securities. All of these are areas in
which we do not have substantial, or any, experience, and all of them are subject to the risks of new and novel businesses, including operational risk,
financial risk, regulatory and legal risk, and reputational risk. Further, even assuming the resolution of all technical, legal and regulatory constraints, Medici
faces the risks that it may be unable to market, license or sell its technology successfully or profitably. Any significant problems Medici encounters with
these projects could have a material adverse effect on our business.
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