Rosetta Stone 2012 Annual Report Download - page 30

Table of Contents
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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 patents, copyrights,
trademarks, trade secret laws, confidentiality procedures, contractual provisions and technical measures.
We have five issued patents in the United States and two foreign patents. We have several patent applications on file in the United States and other
countries. 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 are 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 with our employees, consultants and other third parties will not be breached, that we will be able to effectively
enforce these agreements, that we will have adequate remedies for any breach, or that our trade secrets and other proprietary information will not be
disclosed or will otherwise be protected.
We rely on contractual and license agreements with third parties in connection with their use of our products and technology. There is no guarantee
that such parties will abide by the terms of such agreements or that we will be able to adequately enforce our rights, in part because we rely, in many
instances, on "click-wrap" and "shrink-wrap" licenses, which are not negotiated or signed by individual licensees. Accordingly, some provisions of our
licenses, including provisions protecting against unauthorized use, copying, transfer, resale and disclosure of the licensed software program, may be
unenforceable under the laws of several jurisdictions.
Protection of trade secret and other intellectual property rights in the markets in which we operate and compete is highly uncertain and may involve
complex legal questions. The laws of countries in which we operate may afford little or no protection to our trade secrets and other intellectual property
rights. Although we defend our intellectual property rights and combat unlicensed copying and use of software and intellectual property rights through a
variety of techniques, preventing unauthorized use or infringement of our intellectual property rights is inherently difficult. Despite our enforcement
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