Rosetta Stone 2015 Annual Report Download - page 21

Table of Contents
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, and
other intellectual property where available and appropriate. 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 guarantee 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, could be
unenforceable under the laws of several jurisdictions.
Protection of trade secret and other intellectual property rights in the places 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 efforts
against software piracy, we could lose significant revenue due to illegal use of our software and from counterfeit copies of our software. If piracy activities
increase, it could further harm our business.
We also suspect that competitors might 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 trade secret protection for our source code if any unauthorized disclosure of such
code occurs. The loss of 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.
Third-party use of our trademarks as keywords in Internet search engine advertising programs may direct potential customers to competitors' websites,
which could harm our reputation and cause us to lose sales.
Competitors and other third parties, including counterfeiters, purchase our trademarks and confusingly similar terms as keywords in Internet search
engine advertising programs 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.
Our trademarks are limited in scope and geographic coverage and might not significantly distinguish us from our competition.
We own several U.S. trademark registrations, including registrations of the and trademarks, as
well as U.S. registrations of the color yellow as a trademark. In addition, we 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
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