HP 2014 Annual Report Download - page 19

Research and Development
Innovation is a key element of our culture. Our development efforts are focused on designing and
developing products, services and solutions that anticipate customers’ changing needs and desires, and
emerging technological trends. Our efforts also are focused on identifying the areas where we believe
we can make a unique contribution and the areas where partnering with other leading technology
companies will leverage our cost structure and maximize our customers’ experiences.
HP Labs, together with the various research and development groups within our business
segments, are responsible for our research and development efforts. HP Labs is part of our Corporate
Investments segment.
Expenditures for research and development were $3.4 billion in fiscal 2014, $3.1 billion in fiscal
2013 and $3.4 billion in fiscal 2012. We anticipate that we will continue to have significant research and
development expenditures in the future to support the design and development of innovative,
high-quality products and services to maintain and enhance our competitive position.
For a discussion of risks attendant to our research and development activities, see ‘‘Risk Factors—
If we cannot successfully execute on our strategy and continue to develop, manufacture and market
products, services and solutions that meet customer requirements for innovation and quality, our
revenue and gross margin may suffer,’’ in Item 1A, which is incorporated herein by reference.
Patents
Our general policy has been to seek patent protection for those inventions likely to be
incorporated into our products and services or where obtaining such proprietary rights will improve our
competitive position. At October 31, 2014, our worldwide patent portfolio included over 34,000 patents,
which represents a decrease over the number of patents in our portfolio at the end of fiscal 2013 and
fiscal 2012. This decrease is attributable, in part, to the sale of a portfolio of mobile computing
intellectual property (‘‘IP’’) in January 2014.
Patents generally have a term of twenty years from the date they are filed. As our patent portfolio
has been built over time, the remaining terms of the individual patents across our patent portfolio vary.
We believe that our patents and patent applications are important for maintaining the competitive
differentiation of our products and services, enhancing our freedom of action to sell our products and
services in markets in which we choose to participate, and maximizing our return on research and
development investments. No single patent is in itself essential to HP as a whole or to any of HP’s
business segments.
In addition to developing our patent portfolio, we license IP from third parties as we deem
appropriate. We have also granted and continue to grant to others licenses, and other rights, under our
patents when we consider these arrangements to be in our interest. These license arrangements include
a number of cross-licenses with third parties.
For a discussion of risks attendant to IP rights, see ‘‘Risk Factors—Our revenue, cost of sales, and
expenses may suffer if we cannot continue to license or enforce the IP rights on which our business
depends or if third parties assert that we violate their IP rights,’’ in Item 1A, which is incorporated
herein by reference.
Backlog
We believe that backlog is not a meaningful indicator of future business prospects due to our
diverse products and services portfolio, including the large volume of products delivered from finished
goods or channel partner inventories and the shortening of product life cycles. Therefore, we believe
that backlog information is not material to an understanding of our overall business.
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