Memorex 2012 Annual Report Download - page 11

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In 2011, we signed a strategic agreement with TDK to jointly develop and manufacture magnetic tape technologies and
we discontinued tape coating operations at our Weatherford, Oklahoma facility. Under the agreement, we collaborate on the
research and development of future tape formats in both companies’ research centers in the U.S. and Japan, and
consolidated tape coating operations to the TDK Group Yamanashi manufacturing facility.
We also make significant purchases of finished and semi-finished products, including optical media and USB flash
drives, certain finished tape and tape cartridges and consumer electronic products, primarily from Asian suppliers. For our
optical media, we procure our supply primarily from three companies. If supply were disrupted from any of our primary
suppliers, our business could be negatively impacted. The loss of these certain suppliers could have a material adverse
impact on the business. We view the sourcing and distribution of finished goods as a critical success factor for these products.
Therefore, we seek to establish and maintain strategic sourcing relationships with several key suppliers.
Research, Development and Engineering
Development and timely introduction of new products are important to our success. We maintain an advanced research
facility and invest resources in researching, developing and engineering potential new products and improving existing
products. Our research and development expense was $22.8 million, $21.0 million and $16.4 million for 2012, 2011 and 2010,
respectively. We invest in research, development, engineering and capital equipment in order to remain competitive and
successfully develop and source products that meet market requirements. We are also engaged both on our own and in
collaboration with other organizations in certain research programs related to future generations of magnetic tape that do not
yet have specific commercialized products in the market. We also invest in research related to our strategic focus on data
protection and management, storage hardware, audio and video information products, removable hard drive systems, disk-
based storage systems and related software. As noted above, we signed a strategic agreement with TDK to jointly develop
and manufacture magnetic tape technologies. Under the agreement, we collaborate on the research and development of
future tape formats in both companies’ research centers in the U.S. and Japan.
Intellectual Property
We rely on a combination of patent, trademark and copyright laws, trade secret protection and confidentiality and license
agreements to protect the intellectual property rights related to our products. We register our patents and trademarks in the
United States and in a number of other countries where we do business. United States patents are currently granted for a
term of 20 years from the date a patent application is filed. United States trademark registrations are for a term of ten years
and are renewable every ten years as long as the trademarks are used in the regular course of trade. Pursuant to trademark
license agreements between TDK and Imation and its affiliates, TDK granted Imation and its affiliates a long-term exclusive
license to use the TDK Life on Record brand for current and future recordable magnetic, optical, flash media and accessory
products globally. The trademark license agreements will continue unless terminated by TDK no earlier than 2032 (2017 in
the case of headphones and speakers) or earlier in the event of a material breach of the trademark license agreement,
specific change of control events or default by Imation.
During 2012, we were awarded 25 United States patents and at the end of the year held over 316 patents in the United
States.
Employees
At December 31, 2012, we employed approximately 1,230 people worldwide, with approximately 540 employed in the
United States and approximately 690 employed internationally. Included in our employee count are approximately 200
employees associated with the Nexsan acquisition.
Environmental Matters
Our operations are subject to a wide range of federal, state and local environmental laws. Environmental remediation
costs are accrued when a probable liability has been determined and the amount of such liability has been reasonably
estimated. These accruals are reviewed periodically as remediation and investigatory activities proceed and are adjusted
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