Seagate 2014 Annual Report Download - page 16

TableofContents
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2015,2014and2013,wehadproductdevelopmentexpensesofapproximately$1,353million,
$1,226millionand$1,133million,respectively,whichrepresented10%,9%and8%ofourconsolidatedrevenue,respectively.
PatentsandLicenses
AsofJuly3,2015,wehad5,194U.S.patentsand1,207patentsissuedinvariousforeignjurisdictionsaswellas1,351U.S.and1,296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.
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.
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.
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.
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
13