Since its founding in 1981, Dril-Quip has actively engaged in continuing development efforts to generate new products and improve existing products. When developing new products, the Company typically seeks to design the most technologically advanced version for a particular application to establish its reputation and qualification in that product. Thereafter, the Company leverages its expertise in the more technologically advanced product to produce less costly and complex versions of the product for less demanding applications. The Company also focuses its activities on reducing the overall cost to the customer, which includes not only the initial capital cost but also operating, installation and maintenance costs associated with its products. In the 1980s, the Company introduced its first product, specialty connectors, as well as mudline suspension systems, template systems and subsea wellheads. In the 1990s, the Company introduced a series of new products, including diverters, wellhead connectors, SingleBore™ subsea trees, improved severe service dual bore subsea trees, subsea and platform valves, platform wellheads, platform trees, subsea tree workover riser systems, drilling riser systems and TLP and Spar production riser systems. Since 2000, Dril-Quip has introduced multiple new products including liner hangers, subsea control systems, subsea manifolds and riser tensioners. Dril-Quip’s product development work is primarily conducted at its facilities in Houston, Texas and Aberdeen, Scotland. In addition to the work of its product development staff, the Company’s application engineering staff provides technical services to customers in connection with the design and sales of its products. The Company’s ability to develop new products and maintain technological advantages is important to its future success. See “Item 1A. Risk Factors—Our business could be adversely affected if we do not develop new products and secure and retain patents related to our products.” The Company believes that the success of its business depends more on the technical competence, creativity and marketing abilities of its employees than on any individual patent, trademark or copyright. Nevertheless, as part of its ongoing product development and manufacturing activities, Dril-Quip’s policy has been to seek patents when appropriate on inventions concerning new products and product improvements. All patent rights for products developed by employees are assigned to the Company and almost all of the Company’s products have components that are covered by patents. In 2014, Dril-Quip completed the construction of a high-load horizontal test machine that generates over 20 million ft-lbs of bending and 13 million pounds of tension or compression load to test the strength of a complete subsea wellhead and BOP wellhead connector as a system. The Company delivered its first Offshore Technology Conference (OTC) technical presentation, outlining the results of both its analysis and rigorous testing of the system. The Company believes this project will help the Company’s subsea wellhead product line remain an industry leader of subsea wellhead technology. Additionally, the Company utilized this test machine to develop and test several innovations to our specialty connector product family, and the Company is continuing development efforts in our subsea completion systems and capital equipment product lines. Dril-Quip has numerous U.S. registered trademarks, including Dril-Quip$^{®}$, Quik-Thread$^{®}$, Quik-Stab$^{®}$, Multi-Thread$^{®}$, MS-15$^{®}$, SS-15$^{®}$, SS-10 ® and SU-90$^{®}$. The Company has registered its trademarks in the countries where such registration is deemed material. Although in the aggregate, the Company’s patents and trademarks are of considerable importance to the manufacturing and marketing of many of its products, the Company does not consider any single patent or trademark or group of patents or trademarks to be material to its business as a whole, except the Dril-Quip ® trademark. The Company also relies on trade secret protection for its confidential and proprietary information. The Company routinely enters into confidentiality agreements with its employees and suppliers. There can be no assurance, however, that others will not independently obtain similar information or otherwise gain access to the Company’s trade secrets. 12