ServiceMagic 2012 Annual Report Download - page 20

Table of Contents
protection against competitors and similar technologies. In addition, no assurances can be given that third parties will not create new products or
methods that achieve similar results without infringing upon patents we own.
Despite these measures, our intellectual property rights may still not be protected in a meaningful manner, challenges to contractual rights
could arise or third parties could copy or otherwise obtain and use our intellectual property without authorization. The occurrence of any of
these events could result in the erosion of our brands and limitations on our ability to control marketing on or through the internet using our
various domain names, as well as impede our ability to effectively compete against competitors with similar technologies, any of which could
adversely affect our business, financial conditions and results of operations.
From time to time, we have been subject to legal proceedings and claims in the ordinary course of business, including claims of alleged
infringement of trademarks, copyrights, patents and other intellectual property rights held by third parties. In addition, litigation may be
necessary in the future to enforce our intellectual property rights, protect our trade secrets or to determine the validity and scope of proprietary
rights claimed by others. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of
management and technical resources, any of which could adversely affect our business, financial condition and results of operations. Patent
litigation tends to be particularly protracted and expensive.
Our success depends, in part, on the integrity of our systems and infrastructures and those of third parties. System interruptions and the lack
of integration and redundancy in our and third party information systems may affect our business.
To succeed, our systems and infrastructures must perform well on a consistent basis. From time to time, we may experience occasional
system interruptions that make some or all of our systems or data unavailable or that prevent us from providing products and services, which
could adversely affect our business. Moreover, as traffic to our websites, applications and online properties increases and the number of new
(and presumably more complex) products and services that we introduce continues to grow, we will need to upgrade our systems, infrastructures
and technologies generally to facilitate this growth. If we do not do so, users, customers and third parties with whom we do business may not be
able to access our products and services on an intermittent or prolonged basis, which could adversely affect the quality of their experiences. In
addition, we could experience inefficiencies and/or operational failures in connection with these efforts, which could have the same effect.
Moreover, even if we do not encounter any inefficiencies and/or operational failures in connection with these efforts, third parties with whom we
do business may not make the changes to their systems, infrastructures and technologies needed to access our products and services on a timely
basis, if at all. The occurrence of any of these events could adversely affect our business, financial condition and results of operations.
We also rely on third party computer systems, data centers, broadband and other communications systems and service providers in
connection with the provision of our products and services generally, as well as to facilitate and process certain transactions with our users and
customers. Any interruptions, outages or delays in our systems or those of our third party providers, or deterioration in the performance of these
systems, could impair our ability to provide our products and services and/or process certain transactions with users and customers. Furthermore,
data security breaches (as a result of actions taken by hackers or otherwise), fire, power loss, telecommunications failure, natural disasters, acts
of war or terrorism, acts of God and other similar events or disruptions may damage or interrupt computer, data, broadband or other
communications systems at any time. Any event of this nature could cause system interruptions, delays and loss of critical data, and could
prevent us from providing services to users and customers. While we have backup systems for certain aspects of our operations, our systems are
not fully redundant and disaster recovery planning is not sufficient for all eventualities. In addition, we may not have adequate insurance
coverage to compensate for losses from a major interruption.
In particular, our destination search websites may be adversely affected by fraudulent, surreptitious or other unwanted computer programs,
applications and activity that make changes to users' computers and interfere with the overall experience of our products and services, such as by
hijacking queries to these websites or altering or replacing search results generated. This type of interference often occurs without disclosure to
(or consent from) users, resulting in a negative experience that users may associate with us. These disruptive programs and applications may be
difficult or impossible to uninstall or disable, may reinstall themselves and may circumvent efforts to block or remove them.
In addition, downloadable applications through which we provide search services are also subject to attack by viruses, worms and other
malicious software programs, which could jeopardize the security of information stored in users' computers or in our systems and networks. No
assurances can be given that our efforts to combat these malicious applications will be successful and/or that our products and services will not
have (or will not be perceived to have) vulnerabilities in this regard.
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