Tucows 2014 Annual Report Download - page 31

Once any infringement is detected, disputes concerning the ownership or rights to use intellectual property could be
costly and time-consuming to litigate, may distract management from operating the business, and may result in us
losing significant rights and our ability to operate all or a portion of our business.
Claims of infringement of intellectual property or other rights of third parties against us could result in
substantial costs. Third parties may assert claims of infringement of patents or other intellectual property rights against us
concerning past, current or future technologies. Content obtained from third parties and distributed over the Internet by us
may result in liability for defamation, negligence, intellectual property infringement, product or service liability and
dissemination of computer viruses or other disruptive problems. We may also be subject to claims from third parties
asserting trademark infringement, unfair competition and violation of publicity and privacy rights relating specifically to
domains. As a domain name registrar, we regularly become involved in disputes over registration of domain names. Most
of these disputes arise as a result of a third party registering a domain name that is identical or similar to another party’s
trademark or the name of a living person. These disputes are typically resolved through the UDRP, ICANN’s
administrative process for domain name dispute resolution, or less frequently through litigation under the ACPA, or under
general theories of trademark infringement or dilution. The UDRP generally does not impose liability on registrars, and
the ACPA provides that registrars may not be held liable for registering or maintaining a domain name absent a showing
of bad faith intent to profit or reckless disregard of a court order by the registrars. However, we may face liability if we
fail to comply in a timely manner with procedural requirements under these rules. In addition, these processes typically
require at least limited involvement by us, and therefore increase our cost of doing business. The volume of domain name
registration disputes may increase in the future as the overall number of registered domain names increases.
These claims and any related litigation could result in significant costs of defense, liability for damages and
diversion of management’s time and attention. Any claims from third parties may also result in limitations on our ability
to use the intellectual property subject to these claims unless we are able to enter into agreements with the third parties
making these claims. If a successful claim of infringement is brought against us and we fail to develop non-infringing
technology or to license the infringed or similar technology on a timely basis, we may have to limit or discontinue the
business operations which used the infringing technology.
We rely on technologies licensed from other parties. These third-party technology licenses may infringe on the
proprietary rights of others and may not continue to be available on commercially reasonable terms, if at all. The loss of
this technology could require us to obtain substitute technology of lower quality or performance standards or at greater
cost, which could increase our costs and make our products and services less attractive to customers.
The law relating to the liability of online services companies for data and content carried on or disseminated through
their networks is currently unsettled and could expose us to unforeseen liabilities.
It is possible that claims could be made against online services companies under U.S., Canadian or foreign law
for defamation, negligence, copyright or trademark infringement, or other theories based on data or content disseminated
through their networks, even if a user independently originated this data or content. Several private lawsuits seeking to
impose liability upon Internet service companies have been filed in U.S. and foreign courts. While the United States has
passed laws protecting ISPs from liability for actions by independent users in limited circumstances, this protection may
not apply in any particular case at issue. Our ability to monitor, censor or otherwise restrict the types of data or content
distributed through our network is limited. Failure to comply with any applicable laws or regulations in particular
jurisdictions could result in fines, penalties or the suspension or termination of our services in these jurisdictions. Our
insurance may not be adequate to compensate or may not cover us at all in the event we incur liability for damages due to
data and content carried on or disseminated through our network. Any costs not covered by insurance that are incurred as
a result of this liability or alleged liability, including any damages awarded and costs of litigation, could harm our
business and prospects.
Privacy concerns relating to our technology could damage our reputation and deter current and potential users from
using our services.
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