Tucows 2012 Annual Report Download - page 28

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engaged in Internet commerce. New or revised international, federal, state or local tax regulations may subject us or our
customers to additional sales, income and other taxes. We cannot predict the effect of current attempts to impose sales,
income or other taxes on commerce over the Internet on Tucows or on our customers. New or revised taxes and, in
particular, sales taxes, would likely increase the cost of doing business online and decrease the attractiveness of
advertising and selling goods and services over the Internet. New taxes could also create significant increases in internal
costs necessary to capture data, and collect and remit taxes. Any of these events could have an adverse effect on our
business and results of operations.
We may be accused of intellectual property infringement of the technology we have employed to support both our
back end platform and the products and services we offer to and through our resellers and may be sued for damages
caused by actual use of the platforms or products and services and we may be required to pay substantial damage
awards.
We seek to ensure that we have licensed or otherwise secured the necessary rights to use and offer for use all
intellectual property relating to our platforms and the services we offer resellers through the platforms. Despite our
efforts, we may be sued by third parties claiming rights in and to the technology we employ or by third parties who claim
to have suffered as a result of any use, or inability to use, the platforms, products and services. If we are sued, defense of
any such claims may require the resources of both our time and money. If a third-party is successful in its assertions, we
may be required to pay damages that may have a material impact on our financial resources.
Governmental and Regulatory Risks
Governmental and regulatory policies or claims concerning the domain registration system, and industry reactions to
those policies or claims, may cause instability in the industry and disrupt our domain registration business.
ICANN Oversight of Domain Name Registration System
Before 1999, Network Solutions managed the domain registration system for the .com, .net and .org domains on
an exclusive basis under a cooperative agreement with the U.S. government. In November 1998, the U.S. Department of
Commerce authorized ICANN, a private sector, not for profit corporation, to oversee key aspects of the domain
registration system. ICANN has been subject to strict scrutiny by the public and by the government in the United States
of America. For example, in the United States of America, Congress has held hearings to evaluate ICANN’s selection
process for new top level domains. In addition, ICANN faces significant questions regarding its financial viability and
efficacy as a private sector entity. ICANN may continue to evolve both its long term structure and mission to address
perceived shortcomings such as a lack of accountability to the public and a failure to maintain a diverse representation of
interests on its Board of Directors. We continue to face the risks that:
• the U.S. or any other government may reassess its decision to introduce competition into, or ICANN’s role in
overseeing, the domain registration market;
• the Internet community or the U.S. Department of Commerce or U.S. Congress may refuse to recognize
ICANN’s authority or support its policies, which could create instability in the domain registration system;
• some of ICANN’s policies and practices, and the policies and practices adopted by registries and registrars,
could be found to conflict with the laws of one or more jurisdictions;
• ICANN may lose any one of the several claims pending against it in both the U.S. and international courts, in
which case its credibility may suffer and its policies may be discredited;
• the terms of the Registrar Accreditation Agreement, under which we are accredited as a registrar, coul
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change in ways that are disadvantageous to us or under certain circumstances could be terminated by ICANN
preventing us from operating our Registrar;
• ICANN and, under their registry agreements, VeriSign and other registries may impose increased fees
received for each ICANN accredited registrar and/or domain name registration managed by those registries;
• ICANN or any registries may implement policy changes that would impact our ability to run our curren
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business practices throughout the various stages of the lifecycle of a domain name;