Avid 2004 Annual Report Download - page 23

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9
subassemblies to our specifications. Our systems undergo testing and quality assurance at the final assembly stage. We are
dependent on a number of sole source vendors for certain key hardware components of our products. For the risks
associated with our reliance upon certain vendors, see "Certain Factors that May Affect Future Results" under Item 7.
Our manufacturing facilities are located in Tewksbury, Massachusetts; Dublin, Ireland; Madison, Wisconsin;
Menlo Park, California and Irwindale, California. We also contract with third-party manufacturing facilities in the United
States and overseas for certain component parts.
INTELLECTUAL PROPERTY
We regard our software and hardware as proprietary and protect it under the laws of patents, copyrights,
trademarks, and trade secrets, and through contractual provisions.
We have obtained patents and have registered copyrights, trademarks and service marks in the United States and
foreign countries. In particular, as of December 31, 2004, we held 200 United States patents and had 79 patent applications
pending with the United States Patent and Trademark Office with expiration dates through 2021. We have also registered
or applied to register various trademarks and service marks in the U.S. and a number of foreign countries, including Avid®,
Media Composer®, NewsCutter®, Digidesign®, Pro Tools®, M-Audio®, Softimage®, XSI®, and Alienbrain®. Although
we believe ownership of our patents, copyrights, trademarks and service marks, and trade secrets is an important factor in
our business, our success relies primarily on the innovative skills, technical competence, and marketing abilities of our
personnel.
Our software is licensed to end-users pursuant to either shrink-wrap, embedded or on-line licenses, or signed
license agreements. Our products generally contain copy protection and/or copy-detection features to guard against
unauthorized use. 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 participate in an anti-piracy
program through an external association of software vendors.
RESEARCH AND DEVELOPMENT
Our research and development efforts are focused on the development of digital media content-creation tools and
workgroup solutions that operate primarily on the Macintosh and Windows platforms. We are committed to delivering best-
in-class video, film, 3D animation, and audio editing systems to meet the needs of professionals in the television, film,
music, broadcast news production, and industrial post-production markets, and of end-users in the educational and corporate
markets. Our research and development efforts also include networking and storage initiatives to deliver standards-based
media transfer and media asset management tools, as well as stand-alone and network-attached media storage systems for
workgroups. Our systems are designed to be Internet-enabled with technology for encoding and streaming media over the
Internet.
Our research and development operations are primarily located in Tewksbury, Massachusetts; Daly City,
California; Madison, Wisconsin; Irwindale, California; Munich, Germany; and Montreal, Canada. We also employ
independent contractors in the United States and abroad for some of our research and development activities.
COMPETITION
The markets for our products are highly competitive and subject to rapid change. Our competition is fragmented,
with a large number of suppliers providing different types of products to different markets.
Video Postproduction and 3D
In the TV, video, and film postproduction markets, we compete primarily with vendors that offer similar digital
editing and effects products based on standard computer platforms. These competitors include AJA Video Systems Inc.,
Adobe Systems Incorporated, Apple Computer, BlackMagic Design Pty. Ltd., Discreet (a division of Autodesk, Inc.),
Pinnacle Systems, Inc., Quantel Inc., and Sony Corporation. In the 3D/animation sector, we compete with other
manufacturers of content creation solutions for the video game, feature film, and related markets, including Discreet, Alias,
and NewTek, Inc.