Seagate 2009 Annual Report Download - page 16

Table of Contents
new products to market in high volume, with quality attributes that our customers expect, before our competitors. Part of our product
development strategy is to leverage a design platform and/or subsystem within product families to serve different market needs. This platform
strategy allows for more efficient resource utilization, leverages best design practices, reduces exposure to changes in demand, and allows for
achievement of lower costs through purchasing economies. Our advanced technology integration effort focuses disk drive and component
research on recording subsystems, including read/write heads and recording media, market-specific product technology and 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 2010, 2009 and 2008, we had
product development expenses of approximately $877 million, $953 million and $1,028 million, respectively, which represented 8%, 10% and
8% of our consolidated revenue, respectively.
Patents and Licenses
As of July 2, 2010, we had 4,149 U.S. patents and 625 patents issued in various foreign jurisdictions as well as 1,232 U.S. and 478 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, in addition to
patent protection, the improvement of existing products, reliance upon trade secrets, protection of unpatented proprietary know-how and
development of new products are also important to our business in establishing and maintaining a competitive advantage. Accordingly, we
intend to continue our efforts to broadly protect our intellectual property, including obtaining 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 8. Financial Statements and Supplementary Data—Note 13, Legal, Environmental, and Other Contingencies." The costs of engaging in
intellectual property litigation in the past have been, and in the future 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 patent licenses.
Backlog
In view of our customers' rights to cancel or defer orders with little or no penalty, we believe backlog in the disk drive industry is of limited
indicative value in estimating future performance and results.
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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