HP 2008 Annual Report Download - page 16

Research and Development
We remain committed to innovation as a key element of HP’s culture. Our development efforts
are focused on designing and developing products, services and solutions that anticipate customers’
changing needs and desires and emerging technological trends. Our efforts also are focused on
identifying the areas where we believe we can make a unique contribution and the areas where
partnering with other leading technology companies will leverage our cost structure and maximize our
customers’ experiences.
HP Labs, together with the various research and development groups within the five principal
business segments, are responsible for our research and development efforts. HP Labs is part of our
Corporate Investments segment.
Expenditures for research and development were $3.5 billion in fiscal 2008 and $3.6 billion in fiscal
2007 and 2006. We anticipate that we will continue to have significant research and development
expenditures in the future to provide a continuing flow of innovative, high-quality products and services
to maintain and enhance our competitive position.
For a discussion of risks attendant to our research and development activities, see ‘‘Risk Factors—
If we cannot continue to develop, manufacture and market products and services that meet customer
requirements for innovation and quality, our revenue and gross margin may suffer,’’ in Item 1A, which
is incorporated herein by reference.
Patents
Our general policy has been to seek patent protection for those inventions and improvements
likely to be incorporated into our products and services or where proprietary rights will improve our
competitive position. At October 31, 2008, our worldwide patent portfolio included over 32,000 patents,
which was slightly above the number of patents in our patent portfolio at the end of both fiscal 2007
and fiscal 2006.
Patents generally have a term of twenty years from the time they are filed. As our patent portfolio
has been built over time, the remaining terms on the individual patents vary. While we believe that our
patents and applications are important for maintaining the competitive differentiation of our products
and maximizing our return on research and development investments, no single patent is in itself
essential to us as a whole or any of our principal business segments.
In addition to developing our patents, we license intellectual property from third parties as we
deem appropriate. We have also granted and continue to grant to others licenses under patents owned
by us when we consider these arrangements to be in our interest. These license arrangements include a
number of cross-licenses with third parties.
For a discussion of risks attendant to intellectual property rights, see ‘‘Risk Factors—Our revenue,
cost of sales, and expenses may suffer if we cannot continue to license or enforce the intellectual
property rights on which our businesses depend or if third parties assert that we violate their
intellectual property rights,’’ in Item 1A, which is incorporated herein by reference.
Backlog
We believe that backlog is not a meaningful indicator of future business prospects due to the
diversity of our products and services portfolio, including the large volume of products delivered from
shelf or channel partner inventories and the shortening of product life cycles. Therefore, we believe
that backlog information is not material to an understanding of our overall business.
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