We capitalize costs consisting principally of outside legal costs and filing fees related to obtaining patents.
We amortize patent costs over the useful life of the patent, beginning with the date the United States Patent and
Trademark Office, or foreign equivalent, issues the patent. The weighted average remaining amortizable life of
our issued patents was 10.1 years at December 31, 2014.
The cost of our patents capitalized on our consolidated balance sheet at December 31, 2014 and 2013 was
$25.0 million and $24.9 million, respectively. Accumulated amortization related to patents was $7.8 million and
$9.4 million at December 31, 2014 and 2013, respectively.
Based on existing patents, estimated amortization expense related to patents in each of the next five years is
as follows:
Years Ending December 31,
Amortization
(inmillions)
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1.2
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1.1
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1.1
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$0.9
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$0.8
We review our capitalized patent costs regularly to ensure that they include costs for patents and patent
applications that have future value. We evaluate patents and patent applications that we are not actively pursuing
and write off any associated costs. In 2014, 2013 and 2012, patent expenses were $2.9 million, $10.3 million and
$3.9 million, respectively, and included non-cash charges related to the write-down of our patent costs to their
estimated net realizable values of $1.3 million, $6.4 million and $0.8 million, respectively.
Concentration of credit risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash
equivalents, short-term investments and receivables. We place our cash equivalents and short-term investments
with reputable financial institutions. We primarily invest our excess cash in commercial paper and debt
instruments of the U.S. Treasury, financial institutions, corporations, and U.S. government agencies with strong
credit ratings and an investment grade rating at or aboveA-1, P-1 or F-1 byMoody’s, Standard &Poor’s, or
S&P, or Fitch, respectively. We have established guidelines relative to diversification and maturities that maintain
safety and liquidity. We periodically review and modify these guidelines to maximize trends in yields and interest
rates without compromising safety and liquidity.
Cash, cash equivalents and short-term investments
We consider all liquid investments with maturities of three months or less when we purchase them to be
cash equivalents. Our short-term investments have initial maturities of greater than three months from date of
purchase. We classify our short-term investments as ‘‘available-for-sale’’ and carry them at fair market value
based upon prices for identical or similar items on the last day of the fiscal period. We record unrealized gains
and losses as a separate component of comprehensive income (loss) and include net realized gains and losses in
gain (loss) on investments. We use the specific identification method to determine the cost of securities sold.
We own stock in privately- and publicly-held biotechnology companies that we have received as part of a
technology license or collaboration agreement. At December 31, 2014 we held ownership interests of less than
20 percent in each of the respective companies. We account for our equity investments in publicly-held
companies at fair value and record unrealized gains and losses related to temporary increases and decreases in
the stock of these publicly-held companies as a separate component of comprehensive income (loss). We account
for equity investments in privately-held companies under the cost method of accounting because we own less
than 20 percent and do not have significant influence over their operations. We hold one cost method investment.
Realization of our equity position in this company is uncertain. When realization of our investment is uncertain,
we record a full valuation allowance. In determining if and when a decrease in market value below our cost in
our equity positions is temporary or other-than-temporary, we examine historical trends in the stock price, the
financial condition of the company, near term prospects of the company and our current need for cash. If we
determine that a decline in value in either a public or private investment is other-than-temporary, we recognize
an impairment loss in the period in which the other-than-temporary decline occurs.
F-14
