ADT 2010 Annual Report Download - page 97

Intellectual Property
Patents, trademarks, copyrights and other proprietary rights are important to our business. We also
rely upon trade secrets, manufacturing know-how, continuing technological innovations and licensing
opportunities to maintain and improve our competitive position. We review third-party proprietary
rights, including trademarks, patents and patent applications, in an effort to develop an effective
intellectual property strategy, avoid infringement of third-party proprietary rights, identify licensing
opportunities and misappropriation of our proprietary rights, and monitor the intellectual property
claims of others.
We own a portfolio of patents that principally relates to: electronic security systems; fire protection
products and systems, including fire detection and fire suppression with chemical, gas, foam and water
agents, piping, couplings, fittings for fluid systems; personal protective products and systems for fire and
other hazards; integrated systems for surveillance and control of public transportation and other public
works; structural and electrical tubing and conduit; building structural members, panels and related
fixtures; fire-rated and armored electrical cabling; heat tracing and floor heating systems; security wire
and fencing; and flow control products, including valves, actuators and controllers and airflow control
and sensing products. We also own a portfolio of trademarks and are a licensee of various patents and
trademarks. Patents for individual products extend for varying periods according to the date of patent
filing or grant and the legal term of patents in the various countries where patent protection is
obtained. Trademark rights may potentially extend for longer periods of time and are dependent upon
national laws and use of the marks.
While we consider our patents to be valuable assets, we do not believe that our overall competitive
position is dependent on patent protection or that our overall operations are dependent upon any
single patent or group of related patents.
Research and Development
We are engaged in research and development in an effort to introduce new products, to enhance
the effectiveness, ease of use, safety and reliability of our existing products and to expand the
applications for which the uses of our products are appropriate. We continually evaluate developing
technologies in areas that we believe will enhance our business for possible investment. Our research
and development expense was $131 million in 2010, $116 million in 2009 and $125 million in 2008.
Raw and Other Purchased Materials
We are a large buyer of metals and other commodities, including gasoline. Materials are purchased
from a large number of independent sources around the world. There have been no shortages in
materials that have had a material adverse effect on our businesses. We enter into long-term supply
contracts, using fixed or variable pricing to manage our exposure to potential supply disruptions.
Significant changes in certain raw material costs have had, and may in the future have, an adverse
impact on costs and operating margins. In particular, the Electrical and Metal Products segment is
significantly affected by volatility in the price of steel and copper, with operating margins generally
contracting in a declining price environment and expanding when prices of these commodities are
rising.
Governmental Regulation and Supervision
Our operations are subject to numerous federal, state and local laws and regulations, both within
and outside the United States, in areas such as: consumer protection, government contracts,
international trade, environmental protection, labor and employment, tax, licensing and others. For
example, most U.S. states in which we operate have licensing laws directed specifically toward the
alarm and fire suppression industries. Our ADT Worldwide business currently relies extensively upon
2010 Financials 9