Facebook 2013 Annual Report Download - page 23

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If we are unable to protect our intellectual property, the value of our brand and other intangible assets may be diminished, and
our business may be adversely affected.
We rely and expect to continue to rely on a combination of confidentiality and license agreements with our employees,
consultants, and third parties with whom we have relationships, as well as trademark, copyright, patent, trade secret, and domain name
protection laws, to protect our proprietary rights. In the United States and internationally, we have filed various applications for
protection of certain aspects of our intellectual property, and we currently hold a number of issued patents in multiple jurisdictions
and have acquired patents and patent applications from third parties. In addition, in the future we may acquire additional patents or
patent portfolios, which could require significant cash expenditures. Third parties may knowingly or unknowingly infringe our
proprietary rights, third parties may challenge proprietary rights held by us, and pending and future trademark and patent applications
may not be approved. In addition, effective intellectual property protection may not be available in every country in which we operate
or intend to operate our business. In any or all of these cases, we may be required to expend significant time and expense in order to
prevent infringement or to enforce our rights. Although we have taken measures to protect our proprietary rights, there can be no
assurance that others will not offer products or concepts that are substantially similar to ours and compete with our business. In
addition, we regularly contribute software source code under open source licenses and have made other technology we developed
available under other open licenses, and we include open source software in our products. For example, we have contributed certain
specifications and designs related to our data center equipment to the Open Compute Project Foundation, a non-profit entity that
shares and develops such information with the technology community, under the Open Web Foundation License. As a result of our
open source contributions and the use of open source in our products, we may license or be required to license or disclose code and/
or innovations that turn out to be material to our business and may also be exposed to increased litigation risk. If the protection of our
proprietary rights is inadequate to prevent unauthorized use or appropriation by third parties, the value of our brand and other intangible
assets may be diminished and competitors may be able to more effectively mimic our service and methods of operations. Any of these
events could have an adverse effect on our business and financial results.
We are currently, and expect to be in the future, party to patent lawsuits and other intellectual property rights claims that are
expensive and time consuming, and, if resolved adversely, could have a significant impact on our business, financial condition,
or results of operations.
Companies in the Internet, technology, and media industries own large numbers of patents, copyrights, trademarks, and trade
secrets, and frequently enter into litigation based on allegations of infringement, misappropriation, or other violations of intellectual
property or other rights. In addition, various "non-practicing entities" that own patents and other intellectual property rights often
attempt to aggressively assert their rights in order to extract value from technology companies. Furthermore, from time to time we
may introduce new products, including in areas where we currently do not compete, which could increase our exposure to patent and
other intellectual property claims from competitors and non-practicing entities.
From time to time, we receive notice letters from patent holders alleging that certain of our products and services infringe their
patent rights. We presently are involved in a number of intellectual property lawsuits, and as we face increasing competition and gain
an increasingly high profile, we expect the number of patent and other intellectual property claims against us to grow. Defending
patent and other intellectual property litigation is costly and can impose a significant burden on management and employees, and
there can be no assurances that favorable final outcomes will be obtained in all cases. In addition, plaintiffs may seek, and we may
become subject to, preliminary or provisional rulings in the course of any such litigation, including potential preliminary injunctions
requiring us to cease some or all of our operations. We may decide to settle such lawsuits and disputes on terms that are unfavorable
to us. Similarly, if any litigation to which we are a party is resolved adversely, we may be subject to an unfavorable judgment that
may not be reversed upon appeal. The terms of such a settlement or judgment may require us to cease some or all of our operations
or pay substantial amounts to the other party. In addition, we may have to seek a license to continue practices found to be in violation
of a third party's rights, which may not be available on reasonable terms, or at all, and may significantly increase our operating costs
and expenses. As a result, we may also be required to develop alternative non-infringing technology or practices or discontinue the
practices. The development of alternative non-infringing technology or practices could require significant effort and expense or may
not be feasible. Our business, financial condition, and results of operations could be adversely affected as a result of an unfavorable
resolution of the disputes and litigation referred to above.
We are involved in numerous class action lawsuits and other litigation matters that are expensive and time consuming, and, if
resolved adversely, could harm our business, financial condition, or results of operations.
In addition to intellectual property claims, we are also involved in numerous other lawsuits, including putative class action
lawsuits brought by users and marketers, many of which claim statutory damages or seek significant changes to our business operations,
and we anticipate that we will continue to be a target for numerous lawsuits in the future. Because we have over a billion users, the
plaintiffs in class action cases filed against us typically claim enormous monetary damages even if the alleged per-user harm is small
or non-existent. Any negative outcome from such lawsuits could result in payments of substantial monetary damages or fines, or
undesirable changes to our products or business practices, and accordingly our business, financial condition, or results of operations