THQ 2009 Annual Report Download - page 22

Increased sales of used video game products could lower our sales.
Increased sales of used video games, which are generally priced lower than new video games, could
negatively affect our sales of new titles and thus our revenues.
We rely on external developers for the development of some of our titles.
Some of our titles are developed by third-party developers. We do not have direct control over the
business, finances and operational practices of these external developers. A delay or failure to complete
the work performed by external developers has and may in the future result in delays in, or cancellations
of, product releases. Additionally, the future success of externally-developed titles will depend on our
continued ability to maintain relationships and secure agreements on favorable terms with skilled external
developers. Our competitors may acquire the businesses of key developers or sign them to exclusive
development arrangements. In either case, we would not be able to continue to engage such developers’
services for our products, except for those that they are contractually obligated to complete for us. We
cannot guarantee that we will be able to establish or maintain such relationships with external developers,
and failure to do so could result in a material adverse effect on our business and financial results.
Defects in our game software could harm our reputation or decrease the market acceptance of our products.
Our game software may contain defects. In addition, because we do not manufacture our games for
console platforms, we may not discover defects until after our products are in use by retail customers. Any
defects in our software could damage our reputation, cause our customers to terminate relationships with
us or to initiate product liability suits against us, divert our engineering resources, delay market acceptance
of our products, increase our costs or cause our revenue to decline.
We may not be able to protect our intellectual property rights against piracy, infringement of our patents by
third parties, or declining legal protection for intellectual property.
We defend our intellectual property rights and combat unlicensed copying and use of software and
intellectual property rights through a variety of techniques. Preventing unauthorized use or infringement of
our rights is difficult. Unauthorized production occurs in the computer software industry generally, and if a
significant amount of unauthorized production of our products were to occur, it could materially and
adversely affect our results of operations. We hold copyrights on the products, manuals, advertising and
other materials owned by us and we maintain certain trademark rights. We regard our titles, including the
underlying software, as proprietary and rely on a combination of trademark, copyright and trade secret
laws as well as employee and third-party nondisclosure and confidentiality agreements, among other
methods, to protect our rights. We include with our products a ‘‘shrink-wrap’’ or ‘‘click-wrap’’ license
agreement which imposes limitations on use of the software. It is uncertain to what extent these
agreements and limitations are enforceable, especially in foreign countries. Policing unauthorized use of
our products is difficult, and software piracy is a persistent problem, especially in some international
markets. Further, the laws of some countries where our products are or may be distributed either do not
protect our products and intellectual property rights to the same extent as the laws of the United States, or
are poorly enforced. Legal protection of our rights may be ineffective in such countries. We cannot be
certain that existing intellectual property laws will provide adequate protection for our products.
Third parties may claim we infringe their intellectual property rights.
Although we believe that we make reasonable efforts to ensure that our products do not violate the
intellectual property rights of others, from time to time we receive notices from others claiming we have
infringed their intellectual property rights. The number of these claims may grow. Responding to these
claims may require us to enter into royalty and licensing agreements on unfavorable terms, require us to
stop selling or to redesign affected products, or pay damages or satisfy indemnification commitments
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