Seagate 2007 Annual Report Download - page 17

Table of Contents
exposure to changes in demand, and allows for achievement of lower costs through purchasing economies. Our advanced technology integration
effort focuses disc drive and component research on recording subsystems, including read/write heads and recording media, market-specific
product technology as well as technology focused towards new business opportunities. The primary purpose of our advanced technology
integration effort is to ensure timely availability of mature component technologies to our product development teams as well as allowing us to
leverage and coordinate those technologies in the design centers across our products in order to take advantage of opportunities in the
marketplace. During fiscal years 2008, 2007 and 2006, we had product development expenses of approximately $1 billion, $904 million and
$805 million, respectively, which represented 8%, 8% and 9% of our consolidated revenue, respectively.
Patents and Licenses
As of June 27, 2008, we had approximately 4,015 U.S. patents and 723 patents issued in various foreign jurisdictions as well as
approximately 1,188 U.S. and 579 foreign patent applications pending. The number of patents and patent applications will vary at any given time
as part of our ongoing patent portfolio management activity. Due to the rapid technological change that characterizes the electronic data storage
industry, we believe that the improvement of existing products, reliance upon trade secret law, protection of unpatented proprietary know-how
and development of new products are generally more important than patent protection in establishing and maintaining a competitive advantage.
Nevertheless, we believe that patents are valuable to our business and intend to continue our efforts to protect and obtain patents, where
available, in connection with our research and development program.
The electronic data storage industry is characterized by significant litigation relating to patent and other intellectual property rights.
Because of rapid technological development in the electronic data storage industry, some of our products have been, and in the future could be,
alleged to infringe existing patents of third parties. From time to time, we receive claims that our products infringe patents of third parties.
Although we have been able to resolve some of those claims or potential claims by obtaining licenses or rights under the patents in question
without a material adverse affect on us, other claims have resulted in adverse decisions or settlements. In addition, other claims are pending
which if resolved unfavorably to us could have a material adverse effect on our business and results of operations. For more information on these
claims, see “Item 3. Legal Proceedings.” The costs of engaging in intellectual property litigation in the past have been and may be substantial,
irrespective of the merits of the claim or the outcome. We have patent licenses with a number of companies. Additionally, as part of our normal
intellectual property practices, we may be engaged in negotiations with other major electronic data storage companies and component
manufacturers with respect to licenses.
Backlog
In view of our customers
’
rights to cancel or defer orders with little or no penalty, we believe backlog in the disc drive industry is of
limited indicative value in estimating future performance and results.
Employees
At June 27, 2008, we employed approximately 54,000 employees, temporary employees and contractors worldwide, of which
approximately 42,000 employees were located in our Asian operations. We believe that our future success will depend in part on our ability to
attract and retain qualified employees at all levels. We believe that our employee relations are good.
Environmental Matters
Our operations are subject to U.S. and foreign laws and regulations relating to the protection of the environment, including those governing
discharges of pollutants into the air and water, the management and disposal of hazardous substances and wastes and the cleanup of
contaminated sites. Some of our operations require environmental permits and controls to prevent and reduce air and water pollution, and these
permits are subject to modification, renewal and revocation by issuing authorities.
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