THQ 2011 Annual Report Download - page 23

Our stock price has been volatile and may continue to fluctuate significantly.
The market price of our common stock historically has been, and may continue to be, subject to significant fluctuations.
These fluctuations may be due to factors specific to us (including those discussed in this "Risk Factors" section, as well as others
not currently known to us or that we currently do not believe are material), to changes in securities analysts' earnings estimates
or ratings, to our results or future financial guidance falling below our expectations and analysts' and investors' expectations, to
factors impacting the entertainment, computer, software, Internet, media or electronics industries, to our ability to successfully
integrate any acquisitions we may make, or to national or international economic conditions. In particular, economic downturns
may contribute to the public stock markets' experiencing extreme price and trading volume volatility. These broad market
fluctuations have and could continue to adversely impact the market price of our common stock.
We may not be able to protect our intellectual property rights against piracy, infringement 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 impact 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 U.S., 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.
Software piracy may negatively impact our business.
Software piracy is increasing rapidly in the video game industry. The growth in peer-to-peer networks and other channels
to download pirated copies of our products, the increasing availability of broadband access to the Internet and the proliferation of
technology designed to circumvent the protection measures used with our products all have contributed to an expansion in piracy.
While we are taking various steps to protect our intellectual property and prevent illegal downloading of our video games, we
may not be successful in preventing or controlling such piracy, which may negatively impact our business.
While legal protections exist to combat piracy, preventing and curbing infringement through enforcement of our
intellectual property rights may be difficult, costly and time consuming, particularly in countries where laws are less protective
of intellectual property rights. Further, the scope of the legal protection of copyright and prohibitions against the circumvention
of technological protection measures to protect copyrighted works are often under scrutiny by courts and governing bodies. The
repeal or weakening of laws intended to combat piracy, protect intellectual property and prohibit the circumvention of technological
protection measures could make it more difficult for us to adequately protect against piracy. These factors could have a negative
effect on our growth and profitability in the future.
Third parties may claim we infringe their intellectual property rights.
Although we believe that we make reasonable efforts to ensure 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 impacted products, or pay damages or satisfy indemnification
commitments including contractual provisions under various license arrangements. If we are required to enter into such agreements
or take such actions, our operating margins may decline as a result.
If one or more of our titles were found to contain objectionable undisclosed content, our business could suffer.
Throughout the history of our industry, many video games have been designed to include certain hidden content and
gameplay features that are accessible through the use of in-game cheat codes or other technological means that are intended to
enhance the gameplay experience. However, in some cases, objectionable undisclosed content or features, which were placed in
games without the publishers' knowledge, have been found in interactive entertainment software products. In a few cases, the
14