Rosetta Stone 2012 Annual Report Download - page 31

Table of Contents
efforts against software piracy, we lose significant revenue due to illegal use of our software and from counterfeit copies of our software. If piracy
activities increase, it may further harm our business.
We also expect that the more successful we are, the more likely that competitors will try to illegally use our proprietary information and develop
products that are similar to ours, which may infringe on our proprietary rights. In addition, we could potentially lose future trade secret protection for
our source code if any unauthorized disclosure of such code occurs. The loss of future trade secret protection could make it easier for third parties to
compete with our products by copying functionality. In addition, any changes in, or unexpected interpretations of, the trade secret and other intellectual
property laws in any country in which we operate may compromise our ability to enforce our trade secret and intellectual property rights. Costly and
time-consuming litigation could be necessary to enforce and determine the scope of our confidential information and trade secret protection. If we are
unable to protect our proprietary rights or if third parties independently develop or gain access to our or similar technologies, our business, revenue,
reputation and competitive position could be harmed.


Competitors and other third parties, including counterfeiters, purchase our trademarks and confusingly similar terms as keywords in internet search
engine advertising programs and in the header and text of the resulting sponsored link advertisements in order to divert potential customers to their
websites. Preventing such unauthorized use is inherently difficult. If we are unable to protect our trademarks and confusingly similar terms from such
unauthorized use, competitors and other third parties may continue to drive potential online customers away from our websites to competing and
unauthorized websites, which could harm our reputation and cause us to lose sales.

We own several federal trademark registrations, including registrations of the  mark, hold common law trademark rights and have
trademark applications pending in the U.S. and abroad for additional trademarks. Even if federal registrations and registrations in other countries are
granted to us, our trademark rights may be challenged. It is also possible that our competitors will adopt trademarks similar to ours, thus impeding our
ability to build brand identity and possibly leading to customer confusion. In fact, various third parties have registered trademarks that are similar to ours
in the United States and overseas. We could incur substantial costs in prosecuting or defending trademark infringement suits. If we fail to effectively
enforce our trademark rights, our competitive position and brand recognition may be diminished.

We have not registered our copyrights in all of our software, written materials, website information, designs or other copyrightable works. The
United States Copyright Act automatically protects all of our copyrightable works, but without a registration we cannot enforce those copyrights against
infringers or seek certain statutory remedies for any such infringement. Preventing others from copying our products, written materials and other
copyrightable works is important to our overall success in the marketplace. In the event we decide to enforce any of our copyrights against infringers,
we will first be required to register the relevant copyrights, and we cannot be sure that all of the material for which we seek copyright registration would
be registrable in whole or in part, or that once registered, we would be successful in bringing a copyright claim against any such infringers.
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