Rosemary doesn't need much food, but in a small pot like that, it will need some. What have you been feeding it so far?

you will get the odd leaf turning yellow and dropping off this is normal.
but it does need repotting really.

Both repotting and cutting back the tops, I'd take em down to about 6-8 inches to encourage new, healthy and bushy growth,

As the new growth is now nice and green you could wait a bit before cutting back to let it get a bit longer and then take a few cuttings from it.
You wouldn't think anybody would put a plant in that condition in a plant fair would you?