eBay 2001 Annual Report Download - page 48

underlying laws with respect to the potential liability of online intermediaries like ourselves is less
favorable. We expect that we will increasingly be subject to copyright and trademark infringement claims
as the geographical reach of our services expands. We also expect that we will increasingly be subject to
patent infringement claims as our services expand. These claims, whether meritorious or not, could be
time-consuming, result in costly litigation, cause service upgrade delays, require expensive changes in our
methods of doing business or could require us to enter into costly royalty or licensing agreements, if
available. As a result, these claims could harm our business.
From time to time, we are involved in other disputes that arise in the ordinary course of business. We
believe that the ultimate resolution of these other disputes will not have a material adverse impact on our
Ñnancial position, results of operations or cash Öows.
The inability to expand our systems may limit our growth.
We seek to generate a high volume of traÇc and transactions on our service. The satisfactory
performance, reliability and availability of our websites, processing systems and network infrastructure are
critical to our reputation and our ability to attract and retain large numbers of users. Our revenues depend
primarily on the number of items listed by users, the volume of user transactions that are successfully
completed and the Ñnal prices paid for the items listed. We need to expand and upgrade our technology,
transaction processing systems and network infrastructure both to meet increased traÇc on our site and to
implement new features and functions, including those required under our contracts with third parties. We
may be unable to project accurately the rate or timing of increases, if any, in the use of our service or to
expand and upgrade our systems and infrastructure to accommodate any increases in a timely fashion.
We use internally developed systems to operate our service for transaction processing, including billing
and collections processing. We must continually improve these systems in order to accommodate the level
of use of our websites. In addition, we may add new features and functionality to our services that would
result in the need to develop or license additional technologies. We capitalize hardware and software costs
associated with this development in accordance with generally accepted accounting principles and include
such amounts in property and equipment. Our inability to add additional software and hardware or to
upgrade our technology, transaction processing systems or network infrastructure to accommodate
increased traÇc or transaction volume could have adverse consequences. These consequences include
unanticipated system disruptions, slower response times, degradation in levels of customer support,
impaired quality of the users' experiences of our service and delays in reporting accurate Ñnancial
information. Our failure to provide new features or functionality also could result in these consequences.
We may be unable to eÅectively upgrade and expand our systems in a timely manner or to integrate
smoothly any newly developed or purchased technologies with our existing systems. These diÇculties could
harm or limit our ability to expand our business.
Unauthorized break-ins or other assaults on our service could harm our business.
Our servers are vulnerable to computer viruses, physical or electronic break-ins and similar
disruptions, which could lead to interruptions, delays, loss of data, public release of conÑdential data or the
inability to complete customer transactions. In addition, unauthorized persons may improperly access our
data. We have experienced an unauthorized break-in by a ""hacker'' who has stated that he could, in the
future, damage or change our system or take conÑdential information. We have also experienced ""denial of
service'' type attacks on our system that have made all or portions of our websites unavailable for periods
of time. These and other types of attacks could harm us. Actions of this sort may be very expensive to
remedy and could damage our reputation and discourage new and existing users from using our service.
System failures could harm our business.
Our system has been designed around industry standard architectures to reduce downtime in the event
of outages or catastrophic occurrences. The eBay service provides 24-hours-a-day, seven-days-a-week
availability, subject to a maintenance period during one night each week. Substantially all of our system
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