Rosetta Stone 2013 Annual Report Download - page 8

Table of Contents
Rosetta Stone competes in several categories within the technology-based learning industry, including consumer and institutional language learning,
literacy and reading for students, brain fitness and kids-focused learning solutions.
The language-learning market is highly fragmented globally and consists of a variety of instructional and learning modes: 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. Within consumer-focused language learning, our competitors include Berlitz International Inc., Simon & Schuster, Inc. (Pimsleur), Random House
Ventures LLC (Living Language), McGraw-Hill Education, Duolingo, Fluenz, Busuu, Babbel.com and many other small and regionally-focused participants.
In the institutionally-focused language market, we compete with EF Englishtown, Global English, Wall Street Institute, Inlingua, Imagine Learning as well as
many private language schools and other classroom-based courses.
In the literacy and reading category, we compete primarily in the K-12 Digital Reading space in the U.S. with Scholastic, Inc., Imagine Learning,
Achieve 3000, Scientific Learning, Odyssey (Compass Learning), Waterford Early Reading (Pearson), Renaissance, and MindPlay.
In the brain fitness and training category, the market is new and highly fragmented. We compete with Lumosity and Posit Science as well as many
online and digital app providers.

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, due to the timing of when these organizations receive annual funding. In particular, we generate a significant portion of our consumer sales in the
fourth quarter during the period from Black Friday to Cyber Monday. We sell to a significant number of our retailers, distributors and enterprise and
education 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 and generally are highest in the third and fourth quarters.

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 six U.S. patents, eight foreign patents and several U.S. and foreign patent applications pending. This includes patents held by Tell Me More
(Auralog) acquired in January 2014 and a patent issued in the U.S. in February 2014. Many of the pending patent applications 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 Blue Stone Logo,
and  All of these trademarks are the subject of either registrations or
pending applications in the U.S., as well as numerous countries worldwide where we do business. We have applied to register our yellow color as a trademark
with the U.S. 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 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 are
registering or have registered copyrights in the U.S. all editions of our Version 3 and  languages. We have registered copyright for the refreshed Rosetta
Stone Blue Stone Logo artwork in the U.S. We intend to continue to strategically register copyrights in our various products. We also place significant value on
our trade dress, which is the overall image and appearance of our solutions, and we believe that our trade dress helps to distinguish our solutions in the
marketplace.
7