If we fail to protect our intellectual property rights, competitors may be able to use our technology or trademarks and this would weaken our competitive position, reduce our revenue and increase costs.

Our success will continue to be heavily dependent upon proprietary technology. We rely primarily on a combination of patent, copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary rights. These means of protecting proprietary rights may not be adequate, and the inability to protect intellectual property rights may adversely affect our business and/or financial condition. We currently hold eight United States patents and several pending applications. There can be no assurance that any other patents covering our inventions will be issued or that any patent, if issued, will provide sufficiently broad protection or will prove enforceable in actions against alleged infringers. Our ability to sell our products and prevent competitors from misappropriating our proprietary technology and trade names is dependent upon protecting our intellectual property. Our products are generally licensed to end-users on a “right-to-use” basis under a license that restricts the use of the products for the customer’s internal business purposes. We also rely on “shrink-wrap” and “click-wrap” licenses, which include a notice informing the end-user that by opening the product packaging, or in the case of a click-on license by clicking on an acceptance icon and downloading the product, the end-user agrees to be bound by the license agreement. Despite such precautions, it may be possible for unauthorized third parties to copy aspects of our current or future products or to obtain and use information that is regarded as proprietary. In addition, we have licensed the source code of our products to certain customers under certain circumstances and for restricted uses. In addition, we have also entered into source code escrow agreements with a number of our customers that generally require release of source code to the customer in the event the company enters bankruptcy or liquidation proceedings or otherwise ceases to conduct business. We may also be unable to protect our technology because:

	Competitors may independently develop similar or superior technology,
	Policing unauthorized use of software is difficult,
	The laws of some foreign countries do not protect proprietary rights in software to the same extent as do the laws of the United States,
	“Shrink-wrap” and/or “click-wrap” licenses may be wholly or partially unenforceable under the laws of certain jurisdictions, and
	Litigation to enforce intellectual property rights, to protect trade secrets, or to determine the validity and scope of the proprietary rights of others could result in substantial costs and diversion of resources.

In the future, third parties could, for competitive or other reasons, assert that our products infringe their intellectual property rights.

As discussed above under “Recent Developments,” IBM recently filed a lawsuit against us claiming that some of our products infringe certain of IBM’s patents (“IBM claim”). Other third parties may claim that our current or future products infringe their proprietary rights. These claims, with or without merit, could harm our business by increasing costs and by adversely affecting our ability to sell our products. Any claim of this type, including the IBM claim, could affect our relationships with our existing customers and prevent future customers from licensing our products. Any such claim, including the IBM claim, with or without merit, could be time consuming to defend, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. Royalty or license agreements may not be available on acceptable terms or at all. It is expected that software product developers will increasingly be subject to infringement claims as the number of products and competitors in the software industry segment grows and the functionality of products in different industry segments overlaps.

Errors in our products or the failure of products to conform to customer specifications or expectations could result in our customers demanding refunds from us, asserting claims for damages or limiting sales of products.

Because our software products are complex, they often contain errors or “bugs” that can be detected at any point in a product’s life cycle. While we continually test our products for errors and work with customers through our customer support services to identify and correct bugs in our software, it is expected that product errors will continue to be found in the future. Although many of these errors may prove to be immaterial, some could be significant. Detection of any significant errors may result in, among other things, loss of, or delay in, market acceptance and sales of our products, diversion of development resources, injury to our reputation, or increased service and warranty costs.

The failure of our products to conform to customer specifications or expectations could result in decreased sales of our products.

A key determinative factor in future success will continue to be the ability of our products to operate and perform well with existing and future leading, industry-standard application software products intended to be used in connection with relational and object-relational database management system products. Failure to meet in a timely manner existing or future interoperability and performance requirements of certain independent vendors could adversely affect the market for our products. Commercial acceptance of our products and services could also be adversely affected by critical or negative statements or reports by brokerage firms, industry and financial analysts and industry periodicals about Informix, its products or business, or by the advertising or marketing efforts of competitors, or by other factors that could adversely affect consumer perception.