Yahoo 2005 Annual Report Download - page 27

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21
We are, and may in the future be, subject to intellectual property infringement claims, which are costly to defend,
could result in significant damage awards, and could limit our ability to provide certain content or use certain
technologies in the future.
Internet, technology, media companies and patent holding companies often possess a significant number of
patents. Further, many of these companies and other parties are actively developing or purchasing search,
indexing, electronic commerce and other Internet-related technologies, as well as a variety of online
business models and methods. We believe that these parties will continue to take steps to protect these
technologies, including, but not limited to, seeking patent protection. As a result, disputes regarding the
ownership of technologies and rights associated with online business are likely to continue to arise in the
future. From time to time, parties assert patent infringement claims against us. Currently, we are engaged
in several lawsuits regarding patent issues and have been notified of a number of other potential disputes.
In addition to patent claims, third parties have asserted, and are likely in the future to assert, claims against
us alleging infringement of copyrights, trademark rights, trade secret rights or other proprietary rights, or
alleging unfair competition or violations of privacy rights or failure to maintain confidentiality of user data.
Currently, our subsidiary LAUNCH Media, Inc. (“LAUNCH”) is engaged in a lawsuit regarding copyright
issues that commenced prior to our acquisition of LAUNCH. In addition, third parties have made, and
may continue to make, trademark infringement and related claims against us over the display of search
results triggered by search terms that include trademark terms. A court in France has held us liable for
displaying search results triggered by certain trademarked terms, and we are appealing that decision.
As we expand our business and develop new technologies, products and services, we may become
increasingly subject to intellectual property infringement claims. In the event that there is a determination
that we have infringed third-party proprietary rights such as patents, copyrights, trademark rights, trade
secret rights or other third party rights such as publicity and privacy rights, we could incur substantial
monetary liability, be required to enter into costly royalty or licensing agreements or be prevented from
using the rights, which could require us to change our business practices in the future and limit our ability
to compete effectively. We may also incur substantial expenses in defending against third-party
infringement claims regardless of the merit of such claims. In addition, many of our agreements with our
customers or affiliates require us to indemnify them for certain third-party intellectual property
infringement claims, which could increase our costs in defending such claims and our damages. The
occurrence of any of these results could harm our brand and negatively impact our operating results.
We are subject to United States and foreign government regulation of the Internet and Voice over Internet Protocol
services which could subject us to claims and remedies including monetary liabilities and limitations on our
business practices.
We are subject to regulations and laws directly applicable to providers of Internet and Voice over Internet
Protocol services both domestically and internationally. The application of existing domestic and
international laws and regulations to Yahoo! relating to issues such as user privacy and data protection,
defamation, pricing, advertising, taxation, gambling, sweepstakes, promotions, financial market regulation,
consumer protection, content regulation, quality of services, telecommunications and intellectual property
ownership and infringement in many instances is unclear or unsettled. In addition, we will also be subject
to any new laws and regulations directly applicable to our domestic and international activities. Further,
the application of existing laws to Yahoo! or our subsidiaries regulating or requiring licenses for certain
businesses of our advertisers including, for example, distribution of pharmaceuticals, alcohol, adult
content, tobacco or firearms, as well as insurance and securities brokerage and legal services, can be
unclear. Internationally, we may also be subject to domestic laws regulating our activities in foreign
countries and to foreign laws and regulations that are inconsistent from country to country. We may incur
substantial liabilities for expenses necessary to comply with these laws and regulations or penalties for any