Rosetta Stone 2012 Annual Report Download - page 32

Table of Contents


We own several domain names that include the terms  and . Third parties may acquire substantially similar domain
names that decrease the value of our domain names and trademarks and other proprietary rights which may hurt our business. Third parties also may
acquire country specific domain names in the form of Country Code Top Level Domains which include our trademarks and which prevent us from
operating country specific websites from which customers can view our products and engage in transactions with us. Moreover, the regulation of
domain names in the United States and foreign countries is subject to change. Governing bodies could appoint additional domain name registrars or
modify the requirements for holding domain names. Recently, ICANN (the Internet Corporation for Assigned Names and Numbers), the international
authority over top-level domain names, expanded the number of generic Top Level Domains ("TLDs") which allow companies and organizations to
create additional Web addresses that appear to the right of the "dot," such as the long-standing TLDs, ".com," ".gov" and ".org." ICANN may also add
additional TLDs in the future. As a result, we may not maintain exclusive rights to all potentially relevant domain names in the United States or in other
countries in which we conduct business, which could harm our business or reputation. Moreover, attempts may be made to register our trademarks as
new TLDs or as domain names within the selected new TLDs and we will have to make efforts to enforce our rights against such registration attempts.

We may become subject to material claims of infringement by competitors and other third parties with respect to current or future products, e-
commerce and other web-related technologies, online business methods, trademarks or other proprietary rights. Our competitors, some of which may
have substantially greater resources than we have and they have made significant investments in competing products and technologies, may have, or
seek to apply for and obtain, patents, copyrights or trademarks that will prevent, limit or interfere with our ability to make, use and sell our current and
future products and technologies, and we may not be successful in defending allegations of infringement of these patents, copyrights or trademarks.
Further, we may not be aware of all of the patents and other intellectual property rights owned by third parties that may be potentially adverse to our
interests. We may need to resort to litigation to enforce our proprietary rights or to determine the scope and validity of a third-party's patents or other
proprietary rights, including whether any of our products, technologies or processes infringe the patents or other proprietary rights of third parties. We
may incur substantial expenses in defending against third-party infringement claims regardless of the merit of such claims. The outcome of any such
proceedings is uncertain and, if unfavorable, could force us to discontinue sales of the affected products or impose significant penalties or restrictions on
our business. We do not conduct comprehensive patent searches to determine whether the technologies used in our products infringe upon patents held
by others. In addition, product development is inherently uncertain in a rapidly evolving technological environment in which there may be numerous
patent applications pending, many of which are confidential when filed, with regard to similar technologies.
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Some of our products and services include intellectual property owned by third parties, including software that is integrated with internally
developed software and a portion of our voice recognition software, which we license from the University of Colorado. From time to time we may be
required to renegotiate with these third parties or negotiate with new third parties to include their technology or content in our existing products, in new
versions of our existing products or in wholly new products. We
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