Apple 2013 Annual Report Download - page 16

With respect to its Mac products, the Company believes the availability of third-party software applications and
services depends in part on the developers’ perception and analysis of the relative benefits of developing,
maintaining, and upgrading such software for the Company’s products compared to Windows-based products.
This analysis may be based on factors such as the market position of the Company and its products, the
anticipated revenue that may be generated, continued growth of Mac sales, and the costs of developing such
applications and services. If the Company’s minority share of the global personal computer market causes
developers to question the Company’s prospects, developers could be less inclined to develop or upgrade
software for the Company’s products and more inclined to devote their resources to developing and upgrading
software for the larger Windows market.
With respect to iOS devices, the Company relies on the continued availability and development of compelling
and innovative software applications, which are distributed through a single distribution channel, the App Store.
The absence of multiple distribution channels, which are available for competing platforms, may limit the
availability and acceptance of third-party applications by the Company’s customers, thereby causing developers
to reduce or curtail development for the iOS platform. In addition, iOS devices are subject to rapid technological
change, and, if third-party developers are unable to or choose not to keep up with this pace of change, third-party
applications might not successfully operate and may result in dissatisfied customers. As with applications for the
Company’s Mac products, the availability and development of these applications also depend on developers’
perceptions and analysis of the relative benefits of developing software for the Company’s products rather than
its competitors’ platforms, such as Android. If developers focus their efforts on these competing platforms, the
availability and quality of applications for the Company’s iOS devices may suffer.
The Company relies on access to third-party intellectual property, which may not be available to the Company
on commercially reasonable terms or at all.
Many of the Company’s products include third-party intellectual property, which requires licenses from those
third parties. Based on past experience and industry practice, the Company believes such licenses generally can
be obtained on reasonable terms. There is, however, no assurance that the necessary licenses can be obtained on
acceptable terms or at all. Failure to obtain the right to use third-party intellectual property, or to use such
intellectual property on commercially reasonable terms, could preclude the Company from selling certain
products or otherwise have a material adverse impact on the Company’s financial condition and operating results.
The Company could be impacted by unfavorable results of legal proceedings, such as being found to have
infringed on intellectual property rights.
The Company is subject to various legal proceedings and claims that have not yet been fully resolved and that
have arisen in the ordinary course of business, and additional claims may arise in the future.
For example, technology companies, including many of the Company’s competitors, frequently enter into
litigation based on allegations of patent infringement or other violations of intellectual property rights. In
addition, patent holding companies seek to monetize patents they have purchased or otherwise obtained. As the
Company has grown, the intellectual property rights claims against it have increased and may continue to
increase. In particular, the Company’s cellular enabled products compete with mobile communication and media
device companies that hold significant patent portfolios, and the number of patent claims against the Company
has significantly increased. The Company is vigorously defending infringement actions in courts in a number of
U.S. jurisdictions and before the U.S. International Trade Commission, as well as internationally in Europe and
Asia. The plaintiffs in these actions frequently seek injunctions and substantial damages.
Regardless of the scope or validity of such patents or other intellectual property rights, or the merits of any claims
by potential or actual litigants, the Company may have to engage in protracted litigation. If the Company is found to
infringe one or more patents or other intellectual property rights, regardless of whether it can develop non-infringing
technology, it may be required to pay substantial damages or royalties to a third-party, or it may be subject to a
temporary or permanent injunction prohibiting the Company from marketing or selling certain products.
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