Rosetta Stone 2012 Annual Report Download - page 8

Table of Contents

The Rosetta Stone brand is recognized as a leading technology-based, language-learning solution. The language-learning market is highly
fragmented globally and consists of the following primary models: classroom instruction utilizing the traditional approach of memorization, grammar
and translation; immersion-based classroom instruction; self-study books, audio recordings and software that relies primarily on grammar and
translation; and free online and mobile offerings that provide content and opportunities to practice writing and speaking.
Our competitors include Berlitz International Inc., Simon & Schuster, Inc. (Pimsleur), Random House Ventures LLC (Living Language), Disney
Publishing Worldwide and McGraw-Hill Education.

Our business is affected by variations in seasonal trends. These variations are primarily related to increased sales of our products and services to
consumers in the fourth quarter during the holiday selling season as well as higher sales to governmental and educational institutions in the second and
third quarters. We sell to a significant number of our retailers, distributors and institutional customers on a purchase order basis and we receive orders
when these customers need products and services. As a result, their orders are typically not evenly distributed throughout the year.

Our ability to protect our core technology and intellectual property is critical to our success. We rely on a combination of measures to protect our
intellectual property, including patents, trade secrets, trademarks, trade dress, copyrights and non-disclosure and other contractual arrangements.
We have five U.S. patents, two foreign patents and several U.S. and foreign patents pending. Many of these pending patents relate to our language
teaching methods.
We hold a perpetual, irrevocable and worldwide license from the University of Colorado allowing us to use speech recognition technology for
language-learning solutions. We entered into the license agreement in December 2006, and paid the University of Colorado an up-front license fee.
We have registered a variety of trademarks, including , , 
, , , ., 
, , the Rosetta Stone blue stone logo and design, the Rosetta Stone blue stone logo and design/
,  and  All these trademarks are the subject of either registrations or
pending applications in the United States, as well as numerous countries worldwide where we do business. We have applied to register our yellow color
as a trademark with the United States Patent and Trademark Office. We intend to continue to strategically register, both domestically and internationally,
trademarks we use today and those we develop in the future.
We are registering or have registered in the United States all editions of our Version 3  languages and Re. We have a registered
copyright for the refreshed Rosetta Stone blue stone logo design in the United States. We intend to continue to strategically register copyrights in our
various products.
We believe that the distinctive marks that we use in connection with our solutions are important in building our brand image and distinguishing our
solutions from those of our competitors. These marks are among our most valuable assets. In addition to our distinctive marks, we own several
copyrights and trade dress rights to our solutions, product packaging and user manuals. We also place significant value
7