Vistaprint 2007 Annual Report Download - page 33

The cost to us of any litigation or other proceeding relating to intellectual property rights, even if
resolved in our favor, could be substantial, and the litigation would divert our management’s efforts
from growing our business. Potential adversaries may be able to sustain the costs of complex
intellectual property litigation more effectively than we can because they have substantially greater
resources. Uncertainties resulting from the initiation and continuation of any litigation could limit our
ability to continue our operations or may prevent or delay our acquisition by a third party. If any parties
successfully claim that our sale, use, manufacturing or importation of technologies infringes upon their
intellectual property rights, we might be forced to pay damages and attorney’s fees. Additionally, if we
are found to have willfully infringed a third parties’ patent, we may be liable for treble damages and a
court could enjoin us from performing the infringing activity. Thus, the situation could arise in which our
ability to use certain technologies important to the operation of our business would be restricted by a
court order.
Alternatively, we may be required to, or decide to, enter into a license with a third party that
claims infringement. Any license required under any patent may not be made available on
commercially acceptable terms, if at all. In addition, such licenses are likely to be non-exclusive and,
therefore, our competitors may have access to the same technology licensed to us. If we fail to obtain
a required license and are unable to design around a third party patent, we may be unable to
effectively conduct certain of our business activities, which could limit our ability to generate revenues
or maintain profitability and possibly prevent us from generating revenue sufficient to sustain our
operations.
In addition, we may need to resort to litigation to enforce a patent issued to us or to determine the
scope and validity of third-party proprietary rights. Our ability to enforce our patents, copyrights,
trademarks, and other intellectual property is subject to general litigation risks, as well as uncertainty
as to the enforceability of our intellectual property rights in various countries. When we seek to enforce
our rights, we may be subject to claims that the intellectual property right is invalid, is otherwise not
enforceable, or is licensed to the party against whom we are asserting a claim. In addition, our
assertion of intellectual property rights could result in the other party seeking to assert alleged
intellectual property rights of its own against us, which may adversely impact our business in the
manner discussed above. Our inability to enforce our intellectual property rights under these
circumstances may negatively impact our competitive position and our business.
For instance, in May 2007, we initiated litigation in Federal District Court in Minnesota
alleging infringement by 123Print, Inc. and Drawing Board (US), Inc. of certain U.S. patents owned by
us, and since that time have expanded the lawsuit to include Taylor Strategic Accounts, Inc., a related
party to 123Print, Inc. and Drawing Board (US), Inc., as an additional defendant. The defendants have
denied the infringement allegations and asserted counterclaims for declaratory judgment of invalidity,
unenforceability and non-infringement of the patents. Similarly, in July 2006 we filed a patent
infringement lawsuit against print24 GmbH, unitedprint.com AG and their two managing directors in the
District Court in Düsseldorf Germany, alleging infringement by the defendants of one of our European
patents. In response to our infringement claim, print24 GmbH filed a patent nullification action against
us in June 2007 in German Patent Court in relation to the same European patent at issue in our
infringement lawsuit against print24 and its co-defendants. On July 31, 2007, the District Court in
Düsseldorf found in our favor on the underlying infringement claim against print24 and its
co-defendants, granting all elements of our requested injunction and ordering the defendants to pay
damages for past infringement. The Court’s ruling is scheduled to go into effect in early September
2007, subject to appeal by the defendants. Print24’s nullification action against us in German Patent
Court remains outstanding.
Form 10-K
29