Rosetta Stone 2011 Annual Report Download - page 41

Table of Contents
other persons similarly situated who are or were employed by us as salaried managers in its retail locations in California are due unpaid wages and other relief
for our violations of state wage and hour laws. Plaintiffs moved to amend their complaint to include a nationwide class on January 21, 2011. In November
2011, the plaintiffs' attorneys and the Company agreed to the mediator's proposed settlement terms, and as a result, as of September 30, 2011, we reserved
$0.6 million for the proposed settlement amount. Approval of the proposed settlement by the court is pending. We dispute the plaintiffs' claims and have not
admitted any wrongdoing with respect to the case.
On June 23, 2011, Rosetta Stone GmbH was served with a writ filed by Langenscheidt KG ("Langenscheidt") in the District Court of Cologne, Germany
alleging trademark infringement due to Rosetta Stone's use of the color yellow on its packaging of its language-learning software and the advertising thereof
in Germany. Langenscheidt is seeking, among other things, to enjoin Rosetta Stone GmbH from using the color yellow in Germany, a declaratory judgment
that Rosetta Stone GmbH is liable for damages based on our activities in Germany, and the award of costs and attorneys' fees associated with the legal
proceeding. A hearing was held on October 27, 2011 and the presiding judge indicated his opinion that Rosetta Stone GmbH has infringed on Langenscheidt's
German trademark. On January 19, 2012, the District Court of Cologne ordered an injunction of Rosetta Stone GmbH's use of the color yellow in packaging,
on its website and in television commercials and declared Rosetta Stone liable for damages, attorneys' fees and costs to Langenscheidt. However, no dollar
amounts have been specified yet for the award of damages by the District Court of Cologne. In its decision, the District Court of Cologne also ordered the
destruction of Rosetta Stone GmbH's product and packaging which utilized the color yellow and which was deemed to have infringed Langenscheidt's
trademark. The decision is immediately enforceable upon Langenscheidt's posting of a bond. To date, Langenscheidt has not posted a bond. It is required in
this jurisdiction for a plaintiff to post a bond in order for a decision to be immediately enforced because if the decision were reversed upon appeal, the
defendant would be awarded the bond amount for costs and damages incurred. Langenscheidt has not yet pled the amount of its damages and the court has not
yet made any determination as to the amount of damages. We intend to vigorously defend this matter and have filed a notice of appeal with the Court of
Appeals in Cologne. In addition, we have commenced a separate proceeding directed at cancellation of Langenscheidt's German trademark registration of
yellow as an abstract color mark. However, the outcome of the matter is currently not known, and the range of any potential loss is not reasonably estimable at
this time. Even if the plaintiff is unsuccessful in its claims against us, we will incur legal fees and other costs in the defense of these claims.
From time to time, we have been subject to various claims and legal actions in the ordinary course of our business. We are not currently involved in any
legal proceeding the ultimate outcome of which, in our judgment based on information currently available, would have a material adverse impact on our
business, financial condition or results of operations.
Item 4. Mine Safety Disclosures
Not applicable.
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