Innovation is one of the key areas EADS is focusing on as growth drivers for the future. EADS has established various programmes of cooperation with universities and scientific organisations to develop jointly new technologies, and is continuously evaluating new opportunities to extend partnerships in this area.

“EADS’ innovation strategy aims at increasing competitiveness through continuously improving quality of services and products as well as efficiency of processes. The two main pillars of EADS’ corporate strategy are the EADS Research & Technology (“R&T”) Network and the Corporate Research Centre (“CRC”).”

Due to the specific organisation of EADS in BUs, the company’s strategy has both decentralised and centralised components. All R&D and about 80% of the R&T activities are decentralised. The responsibility of each of the BUs is to ensure the development of products and services that meet customer needs and to offer competitive solutions in line with market expectations.

The centralized efforts are represented by both the EADS R&T Network and the CRC.

The R&T Network coordinates the shared research and technology activities, which involve several BUs and the CRC. The Network is structured around technology domains, which are of common interest, such as Materials and Structures, Electronics, Navigation and Control as well as Image Processing. For each of the domains, a group of R&T experts is formed by representatives of the entities interested in shared work in that domain, thereby ensuring an effective transversal coordination. The Network sets up a common R&T programme and facilitates the circulation of information and research results within the Group. The steering of the EADS R&T Network and the decision making process are performed in a collective way between all participants, inducing useful “bottom-up” and “top-down” exchanges between the experts and management. Additional centralised R&T coordination is accomplished by the team of the Chief technology Officer between the EADS BUs, the CRC and headquarters functions to manage relations with external stakeholders, companies, industrial organisations, research laboratories and universities for example, for joint research projects.

The CRC conducts applied research and supports the R&T Network by providing a platform for the exchange of know-how and by highlighting possible synergies throughout the Group. The CRC has two main sites in Paris and Munich and employs approximately 600 people including doctorates and university interns. It maintains research proximity centres in Toulouse, Nantes (opened in 2005) and Hamburg to support the knowledge transfer to BUs in these locations. A liaison office is operating in Moscow, which facilitates relations with Russian scientific institutes. EADS is also preparing the creation of a centre in Spain and an extension in other countries (i.e., Singapore, Qatar), through laboratories or offices to develop cooperation and to take advantage of competencies wherever they are.

The CRC and the EADS R&T community in the BUs maintains and expands established academic research partnerships with leading universities and high-tech engineering schools by employing thesis students, post-graduate interns and doctorate candidates as well as by contracting specific research projects.

See also “Part 1 / Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Continuous innovation has been the basis of EADS’ success in the past, and the Group is convinced that this will be even more important in the future. Innovation cycles are shortening and new competitors are emerging in all fields of EADS business. To be leading the markets in the future, EADS will always need to be ahead with innovative solutions.

Technological innovation programmes are managed in conjunction with the EADS R&T Network and the EADS CRC as well as through a strong network of top experts in the BUs. EADS aims to make better use of available resources by interacting even more with external scientific and applied research organisations. Such cooperation allows EADS to leverage the resources available in these organisations, which in turn benefit from EADS’ systems knowledge.

In 2005, the Group invested €614 million in R&T alone (€510 million in 2004) to develop technologies for future products, services and processes. On the one hand, the CRC, which focuses on applied research and long-term strategic technologies, spent €93 million of that amount on research programmes in the areas of Materials and Structures, Acoustics, Microsystems and Electronics, Systems Engineering and Information Management Techniques. On the other hand, synergy between the BUs was developed by the EADS R&T Network through 136 shared projects, representing €90 million.

• “One of EADS’ most valuable assets is its intellectual property which includes patents, trade secrets, trademarks, copyrights and other proprietary information. It is EADS’ policy to establish, protect, maintain and defend its rights in all commercially significant IP and to use those rights in responsible ways.
• EADS also respects the valid IP rights of others and will not reproduce or use software or other technology licensed from other suppliers except as permitted by the applicable license agreement or by law.”

The general management of IP in EADS is conducted through an IP committee led by Headquarters. Executives responsible for IP at the main subsidiaries upset on this committee.

Every year, a meeting of the network of those responsible for IP at the entities of the Group is held to explain the EADS’ IP strategy and policy. EADS also promotes training about IP matters. For example, there is one day about IP included in the Corporate Business Academy (“CBA”) training for the experts.

Each of the subsidiary companies of the Group owns the IP which is specific to its particular business and has been generated by this subsidiary. Where IP is of common interest throughout the Group, the subsidiary that generated it may issue a license allowing its use elsewhere (respecting the interests of the other shareholders when appropriate). EADS also owns IP directly or under license agreements with its subsidiaries. EADS centralises and coordinates the Group’s IP portfolio, participates with the subsidiaries in its management and promotes licensing of common IP between the subsidiaries. EADS controls the protection of its IP made in the strategic countries.

EADS also ensures that procedures are in place to protect the confidentiality of the Group’s IP and to ensure contractually that third party rights are protected (in the case of joint ventures). In this respect, suppliers’ contract terms and conditions are currently being strengthened and adapted when dealing with countries with weaker IP laws. The sourcing strategy is also to integrate a segmentation of parts of the contract in order to minimize the risk of industrial espionage and counterfeiting.

To increase the added value of the Group, the team of the EADS Chief Technology Officer promotes the sharing within the Group of all the knowledge of the BUs and the sharing of resources, skills and research means and budget to develop new knowledge, while respecting existing contractual and legal frameworks.

For example, all the contracts between BUs of the Group concerning shared R&T must have provisions allowing for the flow of knowledge (EADS R&T Network rules).

In 2005, the EADS IP portfolio was comprised of approximately 4,900 inventions (approximately 4,400 in 2004), which are covered by over 15,000 patents throughout the world.