Apple 2013 Annual Report Download - page 23

Item 3. Legal Proceedings
The Company is subject to the various legal proceedings and claims discussed below as well as certain other
legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of
business. In the opinion of management, there was not at least a reasonable possibility the Company may have
incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies.
However, the outcome of legal proceedings and claims brought against the Company is subject to significant
uncertainty. Therefore, although management considers the likelihood of such an outcome to be remote, if one or
more of these legal matters were resolved against the Company in a reporting period for amounts in excess of
management’s expectations, the Company’s consolidated financial statements for that reporting period could be
materially adversely affected. See the risk factor “The Company could be impacted by unfavorable results of
legal proceedings, such as being found to have infringed on intellectual property rights” in Part I, Item 1A of this
Form 10-K under the heading “Risk Factors.” The Company settled certain matters during the fourth quarter of
2013 that did not individually or in the aggregate have a material impact on the Company’s financial condition
and results of operations.
The Apple iPod iTunes Antitrust Litigation (formerly Charoensak v. Apple Computer, Inc. and Tucker v. Apple
Computer, Inc.); Somers v. Apple Inc.
These related cases were filed on January 3, 2005, July 21, 2006 and December 31, 2007 in the United States
District Court for the Northern District of California on behalf of a purported class of direct and indirect
purchasers of iPods and iTunes Store content, alleging various claims including alleged unlawful tying of music
and video purchased on the iTunes Store with the purchase of iPods and unlawful acquisition or maintenance of
monopoly market power under §§1 and 2 of the Sherman Act, the Cartwright Act, California Business &
Professions Code §17200 (unfair competition), the California Consumer Legal Remedies Act and California
monopolization law. Plaintiffs are seeking unspecified compensatory and punitive damages for the class, treble
damages, injunctive relief, disgorgement of revenues and/or profits and attorneys fees. Plaintiffs are also seeking
digital rights management free versions of any songs downloaded from iTunes or an order requiring the
Company to license its digital rights management to all competing music players. On September 3, 2013, the
U.S. Ninth Circuit Court of Appeals upheld the District Court’s dismissal of the indirect purchaser case, Somers
v. Apple Inc. The remaining direct purchaser cases are currently pending.
Apple eBooks Antitrust Litigation (United States of America v. Apple Inc., et al.)
On April 11, 2012, the U.S. Department of Justice (the “DOJ”) filed a civil antitrust action against the Company
and five major book publishers in the U.S. District Court for the Southern District of New York, alleging an
unreasonable restraint of interstate trade and commerce in violation of §1 of the Sherman Act and seeking,
among other things, injunctive relief, the District Court’s declaration that the Company’s agency agreements with
the publishers are null and void and/or the District Court’s reformation of such agreements. The DOJ’s complaint
asserted, among other things, that the decision by the five publishers to shift to an agency model to sell eBooks
and their agreements with the Company were an attempt to “raise, fix and stabilize retail e-book prices, to end
price competition among e-book retailers, and to limit retail price competition.” The Company filed a response to
the DOJ complaint in late May 2012, denying the DOJ’s allegations. All five publishers reached a settlement
with the DOJ, which required the publishers to terminate their agreements with the Company and renegotiate
new agreements pursuant to the terms of their settlement with the DOJ. On July 10, 2013, the District Court
found, following a bench trial, that the Company conspired to restrain trade in violation of §1 of the Sherman Act
and relevant state statutes to the extent those laws are congruent with §1 of the Sherman Act. The District Court
entered a permanent injunction, which took effect on October 6, 2013 and will be in effect for five years unless
the judgment is overturned on appeal. A damages trial is set for May 2014. The Company has appealed the
District Court’s decision.
Item 4. Mine Safety Disclosures
Not applicable.
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