Vonage 2010 Annual Report Download - page 18

I
f
we
f
ail to protect our internally developed systems an
d
software and our trademarks, we ma
y
become involved in
cost
l
y
li
t
i
gat
i
on or our
b
us
i
ness or
b
ran
d
may
b
e
h
arme
d
.
O
ur ability to compete effectively is dependent in large part
upon the maintenance and protection of s
y
stems and software
th
at we
h
ave
d
eve
l
ope
di
nterna
lly b
ase
d
on open stan
d
ar
d
s
.
While we have five internall
y
developed issued patents, a numbe
r
of pending patent applications, and acquired three patents fro
m
Digital Packet Licensing, Inc., we cannot patent much of th
e
t
echnology that is important to our business.
O
ur pending patent
app
li
cat
i
ons may not
b
e grante
d
.
A
ny
i
ssue
d
patent t
h
at we ow
n
may
b
ec
h
a
ll
enge
d
, narrowe
d
,
i
nva
lid
ate
d
,orc
i
rcumvente
d
.
T
o
d
ate, we
h
ave re
li
e
d
on copyr
i
g
h
tan
d
tra
d
e secret
l
aws, as we
ll
as confidentiality procedures and licensing arrangements, t
o
esta
bli
s
h
an
d
protect our r
i
g
h
ts to t
hi
s tec
h
no
l
ogy.
W
e typ
i
ca
ll
y
enter into confidentiality or license agreements with our employ
-
ees
,
consultants
,
customers
,
and vendors in an effort to contro
l
access to and distribution of technology, software, doc-
umentation, and other information. Despite these precautions, it
ma
y
be possible for a third part
y
to cop
y
or otherwise obtain an
d
use this technolo
g
y without authorization. Policin
g
unauthorized
use of this technolo
g
y is difficult. The steps we take may no
t
p
revent misappropriation of the technolo
g
y we rely on. In addi-
t
ion, effective protection may be unavailable or limited in some
j
urisdictions outside the United
S
tates,
C
anada, and the United
Kin
g
dom. Liti
g
ation may be necessary in the future to enforce o
r
p
rotect our ri
g
hts or to determine the validity and scope o
f
th
e
r
i
g
hts o
f
others. That liti
g
ation could cause us to incur substantia
l
costs and divert resources away
f
rom our daily business, which i
n
t
urn could materially adversely a
ff
ect our business
.
T
he unlicensed use of our brand b
y
third parties could harm
our reputation, cause confusion among our customers, and impair
our a
bili
ty to mar
k
et our serv
i
ces.
T
ot
h
at en
d
,we
h
ave reg
i
stere
d
numerous trademarks and service marks and have a
pp
lied fo
r
r
e
g
istration of our trademarks and service marks in the United
S
tates and abroad to establish and
p
rotect our brand names as
p
art of our intellectual property strate
g
y. If our application
s
r
eceive objections or are successfully opposed by third parties, i
t
will be difficult for us to prevent third parties from usin
g
our bran
d
without our
p
ermission. Moreover, success
f
ul o
pp
osition to ou
r
applications mi
g
ht encoura
g
e third parties to make additiona
l
oppositions or commence trademark in
f
rin
g
ement proceedin
gs
a
g
ainst us, which could be costly and time consumin
g
to de
f
end
a
g
ainst. I
f
we decide to take limited or no action to protect our
t
rademarks, our trademark ri
g
hts may be diluted and subject t
o
challen
g
e or invalidation, which could materially and adversely
a
ff
ect our brand in the market
p
lace
.
Certain rights to third party patents and technology ma
y
exp
i
re an
d
not
b
e exten
d
e
d
, or may not
b
e ava
il
a
bl
e
.
C
ertain previously disclosed patent ri
g
hts
g
ranted to th
e
C
ompany under our a
g
reements with Verizon, AT&T, and Sprint
will expire between October 2011 and May 2014. It may b
e
necessary to ne
g
otiate extensions o
f
such ri
g
hts, and i
f
so and w
e
are unable to do so on terms acce
p
table to us u
p
on ex
p
iration,
our makin
g
, usin
g
and sellin
g
o
f
existin
g
and
f
uture products and
s
ervices may be subject to challen
g
es as in
f
rin
g
in
g
Verizon, AT&
T
or Sprint patents. In addition, we may seek to obtain ri
g
hts t
o
t
hird party technolo
g
y in the
f
uture, but may not be able to a
g
re
e
upon commerc
i
a
ll
y reasona
bl
e terms or at a
ll
w
i
t
h
respect t
o
obtainin
g
such ri
g
hts. I
f
we are unable to extend existin
g
licenses
or are unable to obtain ri
g
hts to other technolo
g
y that may b
e
commercially advanta
g
eous or necessary
f
or our product an
d
s
ervice o
ff
erin
g
s, we may experience a decrease in the quality o
f
our products or services or we may lose the ability to provide ou
r
p
roducts and services on a non-in
f
rin
g
in
g
basis until alternativ
e
t
echnolo
g
y or suitable alternative products and services can b
e
developed, identified, obtained (throu
g
h acquisition, license o
r
other
g
rants of ri
g
hts), and inte
g
rated
.
O
ur ability to provide our telephony service and manag
e
related customer accounts is de
p
endent u
p
on third-
p
art
y
f
acilities, equipment, and systems, the
f
ailure o
f
which
could cause delays or interruptions o
f
our service, dama
ge
our re
p
utation, cause us to lose customers, limit our
growth, and a
ff
ect our
f
inancial condition
.
O
ur success depends on our abilit
y
to provide qualit
y
and
r
e
li
a
bl
ete
l
ep
h
on
y
serv
i
ce, w
hi
c
hi
s
i
n part
d
epen
d
ent upon t
he
p
roper functioning of facilities and equipment owned and oper
-
ated b
y
third parties and is, therefore, be
y
ond our control. Unlike
t
ra
di
t
i
ona
l
w
i
re
li
ne te
l
ep
h
one serv
i
ce or w
i
re
l
ess serv
i
ce, our serv-
i
ce requ
i
res our customers to
h
ave an operat
i
ve
b
roa
db
an
dI
nter
-
net connect
i
on an
d
an e
l
ectr
i
ca
l
power supp
ly
,w
hi
c
h
are
p
rov
id
e
dby
t
h
e customer
’
s
I
nternet serv
i
ce prov
id
er an
d
e
l
ectr
ic
utilit
y
compan
y
, respectivel
y
, and not b
y
us. The qualit
y
of some
b
roadband Internet connections ma
y
be too poor for customers
t
o use our services properl
y
. In addition, if there is an
y
interruption
t
o a customer
’
s
b
roa
db
an
dI
nternet serv
i
ce or e
l
ectr
i
ca
l
powe
r
s
upp
ly
,t
h
at customer w
ill b
e una
bl
etoma
k
e or rece
i
ve ca
ll
s
,
i
nc
l
u
di
ng emergency ca
ll
s, us
i
ng our serv
i
ce
.
We outsource several o
f
our network
f
unctions to third-part
y
p
roviders. For example, we outsource the maintenance o
f
our
r
egional data connection points, which are the
f
acilities at which
our networ
ki
nterconnects w
i
t
h
t
h
epu
bli
csw
i
tc
h
e
d
te
l
ep
h
on
e
network. I
f
our third-part
y
service providers
f
ail to maintain these
facilities properl
y
, or fail to respond quickl
y
to problems, our cus
-
t
omers ma
y
exper
i
ence serv
i
ce
i
nterrupt
i
ons.
I
nterrupt
i
ons
i
nou
r
s
ervice caused b
y
third-part
y
facilities have in the past caused
and ma
y
in the future cause us to lose customers or cause us t
o
offer substantial customer credits, which could adversel
y
affec
t
our revenue and profitabilit
y
. If interruptions adversel
y
affect th
e
p
erceived reliabilit
y
of our service, we ma
y
have difficult
y
attract
-
i
ng new customers, an
d
our
b
ran
d
, reputat
i
on, an
d
growt
h
w
ill b
e
negat
i
ve
l
y
i
mpacte
d
.
In order to access our residential, small o
ff
ice, and home
o
ff
ice services
,
a customer needs to connect a standard tele
-
ph
one to a
b
roa
db
an
dI
nternet connect
i
on t
h
roug
h
a
V
onage
-
ena
bl
e
dd
ev
i
ce t
h
at we prov
id
e.
Al
t
h
oug
h
we c
l
ose
l
y mon
i
tor
i
nventor
y
levels, i
f
we are unable to procure a su
ff
icient number o
f
devices
f
rom our single supplier in a timely manner, including as
a
r
esult o
f
a
f
ailure b
y
a component supplier, we would be dela
y
e
d
i
n act
i
vat
i
ng new customers an
d
may
l
ose t
h
ese customers.
We also rely on third parties
f
or some o
f
our back o
ff
ice
f
unc
-
t
ions. For exam
p
le, in December 2009, we entered into a
n
a
g
reement with Amdocs, Inc. to license systems to enhance our
orderin
g
and billin
g
capabilities. We expect to be
g
in transitionin
g
t
o the new systems in 2011. Any challen
g
es we encounter wit
h
t
he implementation o
f
the new systems or the transition coul
d
a
ff
ect customer satis
f
action. Any
f
ailure to develop and implement
orderin
g
and billin
g
systems that meet our requirements in a
t
imely manner, or at all, may materially a
ff
ect our ability t
o
11