Rosetta Stone 2010 Annual Report Download - page 33

Table of Contents
development, technical support, sales and marketing and administrative organizations. Any such expansion could cause material losses to the extent we do not
generate additional revenue sufficient to cover the additional expenses.
We may need to raise additional funds to pursue our growth strategy or continue our operations, and we may be unable to raise capital when needed.
From time to time, we may seek additional equity or debt financing to provide for the capital expenditures required to finance working capital
requirements, continue our expansion, develop new products and services or make acquisitions or other investments. In addition, if our business plans change,
general economic, financial or political conditions in our markets change, or other circumstances arise that have a material effect on our cash flow, the
anticipated cash needs of our business as well as our conclusions as to the adequacy of our available sources of capital could change significantly. Any of
these events or circumstances could result in significant additional funding needs, requiring us to raise additional capital. We cannot predict the timing or
amount of any such capital requirements at this time. If financing is not available on satisfactory terms, or at all, we may be unable to expand our business or
to develop new business at the rate desired and our results of operations may suffer.
Risks Related to Intellectual Property Rights
Protection of our intellectual property is limited, and any misuse of our intellectual property by others, including software piracy, could harm our
business, reputation and competitive position.
Our intellectual property is important to our success. We believe our trademarks, copyrights, trade secrets, pending patents, trade dress and designs are
valuable and integral to our success and competitive position. To protect our proprietary rights, we rely on a combination of copyrights, trademarks, trade
secret laws, confidentiality procedures, contractual provisions and technical measures.
We have several patent applications on file. However, we do not know whether any of our pending patent applications will result in the issuance of
patents or whether the examination process will require us to narrow our claims. Even if patents are issued from our patent applications, which is not certain,
they may be contested, circumvented or invalidated in the future. Moreover, the rights granted under any issued patents may not provide us with proprietary
protection or competitive advantages, and, as with any technology, competitors may be able to develop similar or superior technologies now or in the future.
In addition, we have not emphasized patents as a source of significant competitive advantage and have instead sought to primarily protect our proprietary
rights under laws affording protection for trade secrets, copyright and trademark protection of our products, brands, trademarks and other intellectual property
where available and appropriate. However, all of these measures afford only limited protection and may be challenged, invalidated or circumvented by third
parties. In addition, these protections may not be adequate to prevent our competitors or customers from copying or reverse-engineering our products. Third
parties could copy all or portions of our products or otherwise obtain, use, distribute and sell our proprietary information without authorization. Third parties
may also develop similar or superior technology independently by designing around our intellectual property, which would decrease demand for our products.
In addition, our patents may not provide us with any competitive advantages and the patents of others may seriously impede our ability to conduct our
business.
We protect our products, trade secrets and proprietary information, in part, by requiring all of our employees to enter into agreements providing for the
maintenance of confidentiality and the assignment of rights to inventions made by them while employed by us. We also enter into non-disclosure agreements
with our technical consultants, customers, vendors and resellers to protect our confidential and proprietary information. We cannot assure you that our
confidentiality agreements
31