Adobe 2006 Annual Report Download - page 30

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PRODUCT DEVELOPMENT
Since the personal computer and enterprise software industries are characterized by rapid technological
change, a continuous high level of investment is required for the enhancement of existing products and the
development of new products. We primarily develop our software internally. We occasionally acquire products
developed by others by purchasing the stock or assets of the business entity that held ownership rights to the
technology. In other instances, we have licensed or purchased the intellectual property ownership rights of
programs developed by others with license or technology transfer agreements that may obligate us to pay
royalties, typically based on a dollar amount per unit shipped or a percentage of the revenues generated by those
programs.
During fiscal years ended December 1, 2006, December 2, 2005, and December 3, 2004, our research and
development expenses, including costs related to contract development, were $539.7 million, $365.3 million, and
$311.3 million, respectively.
During fiscal 2006, we acquired Macromedia, Inc., a provider of software technologies that enable the
development of a wide range of internet and mobile application solutions. For further information regarding this
acquisition, see Note 2 of our Notes to Consolidated Financial Statements.
During fiscal 2005, we acquired OKYZ S.A., a privately held company, which provided three dimensional
technology and expertise to our Intelligent Document platform.
During fiscal 2004, we acquired Q-Link Technologies, Inc, a privately-held company, which provided Java-
based workflow technology that was integrated with our enterprise server products to enable customers to
integrate document process management with core applications.
PRODUCT PROTECTION
We regard our software as proprietary and protect it under the laws of copyrights, patents, trademarks and
trade secrets. We protect the source code of our software programs as trade secrets, and make source code
available to third parties only under limited circumstances and specific security and confidentiality constraints.
Our products are generally licensed to end users on a “right to use” basis pursuant to a license that restricts
the use of the products to a designated number of devices. We also rely on copyright laws and on “shrink wrap”
and electronic licenses that are not physically signed by the end user. Copyright protection may be unavailable
under the laws of certain countries, and the enforceability of “shrink wrap” and electronic licenses has not been
conclusively determined in all jurisdictions. We have obtained many patents and have registered numerous
copyrights, trademarks, domain names and logos in the United States and foreign countries.
Policing unauthorized use of computer software is difficult and software piracy is a persistent problem for the
software industry. This problem is particularly acute in international markets. We conduct vigorous anti-piracy
programs directly and through certain external software associations. Although our products generally do not
contain copy protection or network copy-detection features, we have recently included activation technology in
certain products to guard against illegal use and will continue to do so in certain future products.
EMPLOYEES
As of January 19, 2007, we employed 6,082 people. We have not experienced work stoppages and believe
our employee relations are good. Competition in recruiting personnel in the software industry, especially highly
skilled engineers, is intense. We believe our future success will depend in part on our continued ability to recruit
and retain highly skilled technical, management and sales and marketing personnel.