Incredimail 2012 Annual Report Download - page 16

Risks Related to Our In
tellectual Property
Unlawful copying of our products or other third party violations of existing legal protections or reductions in the legal protection for
intellectual property rights of software developers or use of open source software could adversely affect our distribution and revenue.
The software products that we sell incorporate a technology that reduces the ability of third parties to copy the software without having
paid for it. Unlicensed copying and use of software and intellectual property rights lead to a loss of potential users and revenue to us, which
could be more significant in countries where laws are less protective of intellectual property rights. Continued educational and enforcement
efforts by governmental authorities may not adequately address this problem, and further deterioration in compliance with existing legal
protections or reductions in the legal protection for intellectual property rights of software developers could adversely affect our revenue.
In addition, certain of our products or services may now or in the future incorporate open source software, which are typically
distributed "as-
is" without warranties, such as warranties of performance or ownership or indemnities against intellectual property infringement
claims. Moreover, to the extent that we incorporate open source software into our products or services the license for such open source software
may obligate us, among other things, to pass on to our licensees without charge the rights to use, copy, modify and redistribute the underlying
software source code, both with respect to the original open source code, any modifications and/or derivatives to such code created by us.
If we fail to detect and stop misrepresentations of our site and products, or for some reason are perceived as promoting malware or
"spamming" or unjustly changing the user’
s computer settings, we could lose the confidence of the users of our products and services,
or our software or provision of search services or advertising could be blocked by software or utilities designed to detect such practices,
thereby causing our business to suffer.
We are exposed to the risk of domains using our brand names (such as "IncrediMail", “Smilebox”, “SweetIM”,
etc.) in various ways,
and attracting in this manner our potential or existing users. These domains often engage in fraudulent or spam activities and their use of our
brand names can result in damage to our reputation and loss of our clients' confidence in our products. In addition, if we or our products were for
some reason perceived as promoting "malware or "spamming", or unjustly changing the user’
s computer settings, our software or provision of
search services or advertising could be blocked by software or utilities designed to detect such practices. If we are unable to effectively detect
and terminate this misrepresentation activity of others or the way that we and our products are perceived, we may lose users and our ability to
produce revenues will be harmed.
Third party claims of infringement or other claims against us could require us to redesign our products, seek licenses, or engage in
costly intellectual property litigation, which could adversely affect our financial position and our ability to execute our business strategy.
The appeal of our products is largely the result of the graphics, sound and multimedia content that we incorporate into our products. We
enter into licensing arrangements with third parties for these uses. However, other third parties may from time to time claim that our current or
future use of content, sound and graphics infringe their intellectual property rights, and seek to prevent, limit or interfere with our ability to
make, use or sell our products. We have experienced such claims in the past although ultimately with no material consequence.
If it appears necessary or desirable, we may seek to obtain licenses for intellectual property rights that we are allegedly infringing, may
infringe or desire to use. Although holders of these types of intellectual property rights often offer these licenses, we cannot assure you that
licenses will be offered or that the terms of any offered licenses will be acceptable to us. Our failure to obtain a license for key intellectual
property rights from a third party for technology or content, sound or graphic used by us could cause us to incur substantial liabilities and to
suspend the development and sale of our products. Alternatively, we could be required to expend significant resources to re-
design our products
or develop non-infringing technology. If we are unable to re-design our products or develop non-
infringing technology, our revenues could
decrease and we may not be able to execute our business strategy.
If we do not prevail in a third-
party action for infringement, we may be required to pay substantial damages and be prohibited from
using intellectual property essential to our products. We may become involved in litigation not only as a result of alleged infringement of a third-
party’s intellectual property rights, but also to protect our own intellectual property rights.
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