Rosetta Stone 2012 Annual Report Download - page 23

Table of Contents
We may also need to grow, reconfigure or relocate our data centers in response to changing business needs, which may be costly and lead to unplanned
disruptions of service.
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
We are subject to regulations and laws directly applicable to providers of online services. The application of existing domestic and international
laws and regulations to us relating to issues such as user privacy and data protection, data security, defamation, promotions, billing, consumer
protection, accessibility, content regulation, quality of services, and intellectual property ownership and infringement in many instances is unclear or
unsettled. In addition, we will also be subject to any new laws and regulations directly applicable to our domestic and international activities.
Internationally, we may also be subject to laws regulating our activities in foreign countries and to foreign laws and regulations that are inconsistent
from country to country. We may incur substantial liabilities for expenses necessary to defend litigation in connection with such regulations and laws or
to comply with these laws and regulations, as well as potential substantial penalties for any failure to comply.
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 enables individuals to exchange information and engage in various online activities on a domestic and an international
basis. The law relating to the liability of providers of online services for activities of their users is currently unsettled both within the United States and
internationally. Claims may be brought against us for defamation, negligence, copyright or trademark infringement, unlawful activity, tort, including
personal injury, fraud, or other theories based on the nature and content of information that may be posted online or generated by our users. Defense of
any such actions could be costly and involve significant time and attention of our management and other resources and may require us to change our
business in an adverse manner.
In addition, the amount of data we store for our users on our servers (including personal information) will increase as we increase our Cloud based
offerings. Any systems failure or compromise of our security that results in the release of our users' data could seriously limit the adoption of our
products and services as well as harm our reputation and brand and, therefore, our business. We may also need to expend significant resources to
protect against security breaches. The risk that these types of events could seriously harm our business is likely to increase as we expand the number of
web based products and services we offer as well as increase the number of countries where we operate.
Further, failure or perceived failure by us to comply with our policies, applicable requirements, or industry self-regulatory principles related to the
collection, use, sharing or security of personal information, or other privacy, data-retention or data-protection matters could result in a loss of user
confidence in us, damage to our brands, and ultimately in a loss of users, advertising partners, or affiliates, which could adversely affect our business.
Hackers develop and deploy viruses, worms, and other malicious software programs that attack our products and services and gain access to our
networks and data centers. Groups of hackers may also act in a coordinated manner to launch distributed denial of service attacks, or other coordinated
attacks. Sophisticated organizations or individuals may launch targeted attacks using novel methods to gain access to computers running our software.
These threats may result in breaches of our network or data security, disruptions of our internal systems and business applications, impairment of our
ability to provide services to our customers, product development delays, harm to our competitive position from the compromise of confidential
business information, or other negative impacts on our business.
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