Shutterfly 2015 Annual Report Download - page 30

business. Further, failure or perceived failure to comply with our policies or applicable requirements related to
the collection, use or security of personal information or other privacy-related matters could damage our
reputation and result in a loss of customers.
Failure to adequately protect our intellectual property could substantially harm our business and results of
operations.
We rely on a combination of patent, trademark, trade secret and copyright law and contractual restrictions to
protect our intellectual property. These protective measures afford only limited protection. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy aspects of our website features and
functionalities or to obtain and use information that we consider proprietary, such as the technology used to
operate our websites, our production operations and our trademarks.
As of December 31, 2015, Shutterfly had 88 patents issued, and had more than 30 patent applications
pending in the United States. We intend to pursue corresponding patent coverage in other countries to the extent
we believe such coverage is appropriate and cost efficient. We cannot ensure that any of our pending applications
will be granted. In addition, third parties have in the past and could in the future bring infringement, invalidity,
co-inventorship or similar claims with respect to any of our currently issued patents or any patents that may be
issued to us in the future. Any such claims, whether or not successful, could be extremely costly to defend, divert
management’s time and attention, damage our reputation and brands and substantially harm our business and
results of operations.
Our primary brands are “Shutterfly,” “Tiny Prints,” “Wedding Paper Divas,” and “BorrowLenses.” We hold
applications and/or registrations for the Shutterfly, Tiny Prints, Wedding Paper Divas, BorrowLenses,
Groovebook, MyPublisher, and ThisLife trademarks in our major markets of the United States and Canada as
well as in the European Community. Our marks are critical components of our marketing programs. If we lose
the ability to use these marks in any particular market, we could be forced to either incur significant additional
marketing expenses within that market, or elect not to sell products in that market.
From time to time, third parties have adopted names similar to ours, applied to register trademarks similar to
ours, and we believe have infringed or misappropriated our intellectual property rights and impeded our ability to
build brand identity, possibly leading to customer confusion. In addition, we have been and may continue to be
subject to potential trade name or trademark infringement claims brought by owners of marks that are similar to
Shutterfly, Tiny Prints, Wedding Paper Divas, BorrowLenses, ThisLife or one of our other marks.
We respond on a case-by-case basis and where appropriate may send cease and desist letters or commence
opposition actions and litigation. However, we cannot ensure that the steps we have taken to protect our
intellectual property rights are adequate, that our intellectual property rights can be successfully defended and
asserted in the future or that third parties will not infringe upon or misappropriate any such rights. In addition,
our trademark rights and related registrations may be challenged in the future and could be canceled or narrowed.
Failure to protect our trademark rights could prevent us in the future from challenging third parties who use
names and logos similar to our trademarks, which may in turn cause consumer confusion or negatively affect
consumers’ perception of our brands, products, and services. Any claims or consumer confusion related to our
marks could damage our reputation and brands and substantially harm our business and results of operations.
If we become involved in intellectual property litigation or other proceedings related to a determination of
rights, we could incur substantial costs, expenses or liability, lose our exclusive rights or be required to stop
certain of our business activities.
From time to time, we have received, and likely will continue to receive, communications from third parties
inviting us to license their patents or accusing us of infringement. There can be no assurance that a third party
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