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violations  of  intellectual  property  rights,  as  well  as  other  claims  related  to  using  particular  content,  may  be 
extremely broad, and as such, it is likely we will face certain claims in the ordinary course of business.

We may be required to settle such litigation on terms that are unfavorable to us. For example, a settlement may 
require  us  to  obtain  a  license  to  continue  practices  alleged  to  violate  a  third  party’s  rights,  which  may  not  be 
available on reasonable terms and may significantly increase our operating expenses. Such a license may not be 
available  to  us  at  all.  As  a  result,  we  may  be  required  to  develop  alternative  technology  or  practices  or 
discontinue such allegedly infringing practices. The development of alternative technology or practices would 
require significant effort and expense or may not be successful. 

Similarly, if any litigation to which we may be a party fails to settle and we go to trial, we may be subject to an 
unfavorable  judgment  which  may  not  be  reversible  upon  appeal.  The  terms  of  a  judgment  may  require  us  to 
cease some or all of our operations or require the payment of substantial amounts. Any of these events could 
cause our business, financial condition, and results of operations to be adversely affected as a result.

We  also  offer  to  indemnify  our  contract  counterparties  for  certain  third-party  infringement  claims  against 
them, and such indemnification obligations may be excluded from contractual limitation of liability provisions 
that limit our exposure. In certain cases, our indemnification obligations may be broad or unlimited in scope, 
which could expose us to significant contingent liabilities, particularly given the unsettled nature of intellectual 
property  law  as  applied  to  AI-generated  outputs  and  the  potential  for  claims  to  arise  from  a  wide  range  of 
customer  use  cases  that  we  cannot  predict  or  control. For  example,  certain  of  our  agreements  require  us  to 
defend and indemnify the counterparty, without a cap on our liability, against third-party claims alleging that 
our models, or outputs generated by our models, infringe third-party intellectual property rights. In addition, as 
described in the section titled “—We may be exposed to liability, litigation, and regulatory action arising from 
harms associated with our AI models, and our contractual protections and insurance may be insufficient, any of 
which  could  adversely  affect  our  business,  financial  condition,  and  results  of  operations,”  certain  of  our 
agreements  with  external  evaluators  and  testing  vendors  require  us  to  defend  and  indemnify  the  evaluator, 
without  a  cap  on  our  liability,  against  certain  third-party  claims,  including  claims  of  intellectual  property 
infringement.  Third-party  infringement  claims  may  require  us  to  initiate  or  defend  protracted  and  costly 
litigation on behalf of our customers and distribution partners, regardless of the merits of these claims. If any of 
these claims succeed, we may be forced to pay damages on behalf of our customers and reseller partners, may 
be required to modify our allegedly infringing models, platform, and applications to make them non-infringing, 
or  may  be  required  to  obtain  licenses  under  the  infringed  intellectual  property  rights.  If  we  cannot  obtain  all 
necessary  licenses  on  commercially  reasonable  terms  or  are  unable  to  modify  our  models,  platform,  and 
applications or technology so that they are no longer infringing, our customers may be forced to stop using our 
models,  platform,  and  applications,  and  our  distribution  partners  may  be  forced  to  stop  selling  our  models, 
platform, and applications. Even if we do not litigate these matters to a judgment, we may be required to settle 
such litigation on terms that are unfavorable to us.

If we fail to adequately protect our intellectual property rights, our competitive position may 
be  impaired,  and  we  may  lose  valuable  assets,  generate  reduced  revenue,  and  incur  costly 
litigation to protect our rights, which may adversely affect our business, financial condition, 
and results of operations.

Our success is dependent, in part, upon protecting our intellectual property rights and proprietary information. 
We  rely  and  expect  to  continue  to  rely  on  a  combination  of  trademark,  copyright,  patent,  and  trade  secret 
protection laws, along with contractual restrictions, to protect our intellectual property rights and proprietary 
information.  However,  we  cannot  guarantee  that  the  steps  we  take  to  protect  our  intellectual  property  rights 
and proprietary information will be sufficient, or that we will have adequate remedies for any such failure. In 
particular,  current  or  former  employees,  contractors,  or  other  insiders  with  access  to  our  proprietary  model 
weights,  training  data,  algorithms,  research  insights,  or  other  proprietary  information,  could  misappropriate 
such  information,  whether  for  personal  gain,  to  benefit  competitors,  to  harm  our  company,  or  for  other 
purposes, and our confidentiality agreements and internal security controls may not be sufficient to prevent or 
detect such malfeasance.

Further, third parties have in the past, and may in the future, knowingly or unknowingly infringe or circumvent 
our intellectual property rights, and we may not be able to prevent infringement without incurring substantial 
expense.  Litigation  brought  to  protect  and  enforce  our  intellectual  property  rights  has  been,  and  would  be, 

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