THQ 2012 Annual Report Download - page 24

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We believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future
performance. We may not be able to maintain consistent profitability on a quarterly or annual basis. It is likely that in some
future quarter, our operating results may be below the expectations of securities analysts and investors as a result of the factors
described above and others described throughout this "Risk Factors" section, which may in turn cause the price of our common
stock to fall or significantly fluctuate.
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 limited 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 adversely 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 an adverse effect on our growth operational results 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 cash flows and operating margins may decline as a result.