Apple 2007 Annual Report Download - page 27

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Company believes its existing facilities and equipment are well maintained and in good operating condition.
The Company has invested in internal capacity and strategic relationships with outside manufacturing vendors, and therefore believes it has
adequate manufacturing capacity for the foreseeable future. The Company
continues to make investments in capital equipment as needed to meet
anticipated demand for its products.
Item 3. Legal Proceedings
The Company is subject to various legal proceedings and claims as of September 29, 2007, the end of the annual period covered by this report,
that are discussed below. The Company is also subject to certain other legal proceedings and claims that have arisen in the ordinary course of
business and which have not been fully adjudicated. In the opinion of management, the Company does not have a potential liability related to
any current legal proceedings and claims that would individually or in the aggregate have a material adverse effect on its financial condition or
operating results. However, the results of legal proceedings cannot be predicted with certainty. Should the Company fail to prevail in any of
these legal matters or should several of these legal matters be resolved against the Company in the same reporting period, the operating results of
a particular reporting period could be materially adversely affected. The Company settled certain matters during the fourth quarter of 2007 that
did not individually or in the aggregate have a material impact on the Company's results of operations.
Apple Computer, Inc. v. Burst.com, Inc.
The Company filed an action for declaratory judgment against defendant Burst.com, Inc. on January 4, 2006 in the United States District Court
for the Northern District of California. The Company seeks declaratory judgment that U.S. Patent Nos. 4,963,995, 5,164,839, 5,057,932 and
5,995,705 ("Burst patents") are invalid and not infringed by the Company. Burst filed an answer and counterclaim on April 17, 2006 adding
infringement allegations relating to U.S. Patent No. 5,995,705. Apple counterclaimed for declaratory judgment that each of these patents is
invalid, not infringed and unenforceable. Burst alleges that the following Apple products and services infringe the four patents at issue: iTunes
Store, iPod devices, iTunes software, iLife software (GarageBand, iMovie, iWeb) separately and in conjunction with the .Mac service and Apple
computers sold with or running iTunes or iLife. The Burst patents allegedly relate to methods and devices used for faster-than-real-time
transmission of compressed audio and/or video files. The court issued its claim construction ruling on May 8, 2007. The Company filed motions
for summary judgment of invalidity on January 4, 2007 and July 13, 2007. The court held a hearing on those pending motions on September 18,
2007 and has not issued a decision. The Company filed motions for summary judgment and partial summary judgment relating to enablement,
indefiniteness and laches on October 29, 2007. Trial is set for February 26, 2008.
Bader v. Anderson, et al.
Plaintiff filed this purported shareholder derivative action against the Company and each of its then current executive officers and members of its
Board of Directors on May 19, 2005 in Santa Clara County Superior Court asserting claims for breach of fiduciary duty, material misstatements
and omissions and violations of California Business & Professions Code ยง17200 (unfair competition). The complaint alleged that the Company's
March 14, 2005, proxy statement was false and misleading for failure to disclose certain information relating to the Apple Computer, Inc.
Performance Bonus Plan, which was approved by shareholders at the annual meeting held on April 21, 2005. Plaintiff, who ostensibly brings suit
on the Company's behalf, made no demand on the Board of Directors and alleged that such demand was excused. The complaint sought
injunctive and other relief for purported injury to the Company. On July 27, 2005, plaintiff filed an amended complaint alleging that, in addition
to the purported derivative claims, adoption of the bonus plan and distribution of the proxy statement describing that plan also inflicted injury on
her directly as an individual shareholder. On January 10, 2006, the Court sustained defendants' demurrer to
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