Pandora 2012 Annual Report Download - page 38

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Table of Contents
2011, we were served with a complaint by Augme Technologies, Inc. alleging that we infringed an Augme patent and seeking injunctive relief and monetary
damages. Such litigation may involve patent holding companies or other adverse patent owners who have no relevant product revenue, and therefore our own
issued and pending patents may provide little or no deterrence to these patent owners in bringing intellectual property rights claims against us. In addition,
various federal and state laws and regulations govern the intellectual property rights associated with sound recordings and musical works. Existing laws and
regulations are evolving and subject to different interpretations, and various federal and state legislative or regulatory bodies may expand current or enact new
laws or regulations. We cannot assure you that we are not infringing or violating any third-party intellectual property rights.
We cannot predict whether assertions of third-party intellectual property rights or any infringement or misappropriation claims arising from such
assertions will substantially harm our business and operating results. If we are forced to defend against any infringement or misappropriation claims, whether
they are with or without merit, are settled out of court, or are determined in our favor, we may be required to expend significant time and financial resources
on the defense of such claims. Furthermore, an adverse outcome of a dispute may require us to pay damages, potentially including treble damages and
attorneys' fees, if we are found to have willfully infringed a party's intellectual property; cease making, licensing or using solutions that are alleged to infringe
or misappropriate the intellectual property of others; expend additional development resources to redesign our solutions; enter into potentially unfavorable
royalty or license agreements in order to obtain the right to use necessary technologies, content, or materials; and to indemnify our partners and other third
parties. Royalty or licensing agreements, if required or desirable, may be unavailable on terms acceptable to us, or at all, and may require significant royalty
payments and other expenditures. In addition, any lawsuits regarding intellectual property rights, regardless of their success, could be expensive to resolve and
would divert the time and attention of our management and technical personnel.
We may require additional capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances. If
capital is not available to us, our business, operating results and financial condition may be harmed.
We may require additional capital to operate or expand our business. In addition, some of our current or future strategic initiatives, including entry into
non-music content channels, such as comedy, or international markets, may require substantial additional capital resources before they begin to generate
revenue. Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. For example, our current credit facility
contains restrictive covenants relating to our capital raising activities and other financial and operational matters, and any debt financing secured by us in the
future could involve further restrictive covenants, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. In
addition, volatility in the credit markets may have an adverse effect on our ability to obtain debt financing. If we do not have funds available to enhance our
solutions, maintain the competitiveness of our technology and pursue business opportunities, we may not be able to service our existing listeners, acquire new
listeners or attract or retain advertising customers, each of which could inhibit the implementation of our business plan and materially harm our operating
results.
We may acquire other companies or technologies, which could divert our management's attention, result in additional dilution to our stockholders and
otherwise disrupt our operations and harm our operating results.
We may in the future seek to acquire or invest in businesses, products or technologies that we believe could complement or expand our service, enhance
our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to
incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.
In addition, we do not have any experience in acquiring other businesses. If we acquire additional businesses, we may not be able to integrate the
acquired personnel, operations and technologies successfully, or effectively manage the combined business following the acquisition. We also may not
achieve the anticipated benefits from the acquired business due to a number of factors, including:
unanticipated costs or liabilities associated with the acquisition;
incurrence of acquisition-related costs;
diversion of management's attention from other business concerns;
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