Yahoo 2011 Annual Report Download - page 14

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of which may have a potential competitive advantage due to an existing direct billing relationship with their
users, dominant market share in their territories, greater brand recognition, focus on a single market, familiarity
with local tastes and preferences, or greater regulatory and operational flexibility.
Additional information regarding competition is included in Part I, Item 1A “Risk Factors” of this Annual Report
on Form 10-K and is incorporated herein by reference.
PRODUCT DEVELOPMENT
Yahoo! continually enhances, expands, and launches products and features to meet evolving user, advertiser, and
publisher needs for technological innovation and a deeper, more integrated experience.
Most of our software products and features are developed internally by our employees. In some instances,
however, we might purchase technology and license intellectual property rights if the opportunity is strategically
aligned, operationally compatible, and economically advantageous. While it may be necessary in the future to
seek or renew licenses relating to various aspects of our products, we believe based on past experience and
industry practice that such licenses generally could be obtained on commercially reasonable terms. We believe
our continuing innovation and product development are not materially dependent upon any single license or other
agreement with a third party relating to the development of our products.
Yahoo!’s Product Development organization includes a broad array of engineering talent that spans the breadth
of our technology infrastructure. This includes deep expertise in scalable platforms, networking and
communications technologies and presentation layer frameworks. Our Product Development organization
includes Yahoo! Labs. This organization includes our industry-leading Yahoo! Research group, our Applied
Sciences group and our Academic Relations team, which has spearheaded key relationships with some of the
world’s most influential universities and institutions. Yahoo! Labs is designed to foster the long-term scientific
competitiveness of Yahoo! as a world leader on the Internet through cutting-edge, multi-disciplinary research in a
variety of fields, including economic theory, computer science, artificial intelligence, and various social sciences.
In addition to Yahoo! Labs, the Product Development organization contains our Cloud Computing group which
provides the common computing infrastructure upon which our products are delivered, including grid computing.
Finally, the Product Development organization contains our Cloud Platforms group, which focuses on the
common elements that are embedded in multiple Yahoo! Products. These elements include the user data base and
login, video and social connection platforms.
Our engineering and production teams are primarily located in our Sunnyvale, California headquarters,
Bangalore, India, and Beijing, China. Product development expenses for 2009, 2010, and 2011 totaled
approximately $1.2 billion, $1.1 billion, and $1.0 billion, respectively, which included stock-based compensation
expense of $206 million, $107 million, and $90 million, respectively.
INTELLECTUAL PROPERTY
We create, own, and maintain a wide array of intellectual property assets that we believe are among our most
valuable assets. Our intellectual property assets include patents and patent applications related to our innovations,
products and services; trademarks related to our brands, products and services; copyrights in software and
creative content; trade secrets; and other intellectual property rights and licenses of various kinds. We seek to
protect our intellectual property assets through patents, copyrights, trade secrets, trademarks and laws of the U.S.
and other countries, and through contractual provisions. We enter into confidentiality and invention assignment
agreements with our employees and contractors, and utilize non-disclosure agreements with third parties with
whom we conduct business in order to secure and protect our proprietary rights and to limit access to, and
disclosure of, our proprietary information. We consider the Yahoo! trademark and our many related company
brands to be among our most valuable assets, and we have registered these trademarks in the U.S. and other
countries throughout the world and actively seek to protect them. We have licensed in the past, and expect that
we may license in the future, certain of our technology and proprietary rights, such as trademark, patent,
copyright, and trade secret rights, to third parties.
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