Stamps.com 2012 Annual Report Download - page 16

Increases in payment processing fees would increase our operating expenses and adversely affect our results of operations.
Our customers pay for our services predominately using credit cards and debit cards and, to a lesser extent, by use of automated clearing house
payments. Our acceptance of these payment methods requires our payment of certain fees. From time to time, these fees may increase, either as a
result of rate changes by the payment processing companies or as a result of a change in our business practices that increase the fees on a cost-
per-transaction basis. If these fees for accepting payment methods increase in future periods, it may adversely affect our results of operations.
A decline in our ability to effectively bill our customers by credit card and debit card would adversely affect our results of operations.
Our ability to effectively charge our customers through credit cards and debit cards is subject to many variables, including our own billing
technology and practices, the practices and rules of payment processing companies, and the practices and rules of issuing financial institutions. If
we do not effectively charge and bill our customers in future periods through credit cards and debit cards, it would adversely affect our results of
operations.
Third party assertions of violations of their intellectual property rights could adversely affect our business.
Substantial litigation regarding intellectual property rights exists in our industry. Third parties may currently have, or may eventually be issued,
patents upon which our products or technology infringe. Any of these third parties might make a claim of infringement against us. We may
become aware of, or we may increasingly receive correspondence claiming, potential infringement of other parties’
intellectual property rights.
We could incur significant costs and diversion of management time and resources to defend claims against us regardless of their validity. Any
associated costs (including settlements cost, judgments and legal expenses) and business distractions could have a material adverse effect on our
business, financial condition and results of operations. In addition, litigation in which we are accused of infringement might cause product
development delays, require us to develop non-
infringing technology or require us to enter into royalty or license agreements, which might not
be available on acceptable terms, or at all. If a successful claim of infringement were made against us and we could not develop non-
infringing
technology or license the infringed or similar technology on a timely and cost-
effective basis, our business could be significantly harmed or fail.
Any loss resulting from intellectual property litigation could severely limit our operations, cause us to pay license fees, or prevent us from doing
business.
A failure to protect our own intellectual property could harm our competitive position.
We rely on a combination of patent, trade secret, copyright and trademark laws and contractual restrictions, such as confidentiality agreements
and licenses, to establish and protect our rights in our products, services, know-
how and information. We have a portfolio of issued and pending
US and international patents. We also have a number of registered and unregistered trademarks. We plan to apply for more patents in the future.
We may not receive patents for any of our patent applications. Even if patents are issued to us, claims issued in these patents may not protect our
technology. In addition, a court might hold any of our patents, trademarks or service marks invalid or unenforceable. Even if our patents are
upheld or are not challenged, the costs of enforcing our patents can be material, and third parties may develop alternative technologies or
products without infringing our patents. If our patents fail to protect our technology or our trademarks and service marks are successfully
challenged, our competitive position could be harmed. We also generally enter into confidentiality agreements with our employees, consultants
and other third parties to control and limit access and disclosure of our confidential information. These contractual arrangements or other steps
taken to protect our intellectual property may not prove to be sufficient to prevent misappropriation of technology or deter independent third
party development of similar technologies. Additionally, the laws of foreign countries may not protect our services or intellectual property rights
to the same extent as do the laws of the United States.
System and online security failures could harm our business and operating results.
Our services depend on the efficient and uninterrupted operation of our computer and communications hardware systems. In addition, we must
provide a high level of security for the transactions we execute. We rely on internally-developed and third-
party technology to provide secure
transmission of postage and other confidential information. Any breach of these security measures would severely impact our business and
reputation and would likely result in the loss of customers and revenues. Furthermore, if we fail to provide adequate security, the USPS could
prohibit us from selling postage over the Internet.
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