Seagate 2011 Annual Report Download - page 17

Table of Contents
Research and Development
We are committed to developing new component technologies, products and alternative storage technologies. Our research and
development focus is designed to bring 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
2012, 2011, and 2010, we had product development expenses of approximately $1,006 million, $875 million, and $877 million, respectively,
which represented 7%, 8%, and 8% of our consolidated revenue, respectively.
Patents and Licenses
As of June 29, 2012, we had 5,323 U.S. patents and 1,866 patents issued in various foreign jurisdictions as well as 1,275 U.S. and 1,156
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 14, 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 industry practice, whereby customers may 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.
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