VMware 2011 Annual Report Download - page 26

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Table of Contents
secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. This risk may
increase as the number of products and competitors in our market increases and overlaps occur. In addition, as a well-known information
technology company, we face a higher risk of being the subject of intellectual property infringement claims. Any claim of infringement by a
third party, even one without merit, could cause us to incur substantial costs defending against the claim, and could distract our management
from our business. Furthermore, a party making such a claim, if successful, could secure a judgment that requires us to pay substantial damages.
A judgment could also include an injunction or other court order that could prevent us from offering our products. In addition, we might be
required to seek a license for the use of such intellectual property, which may not be available on commercially reasonable terms or at all.
Alternatively, we may be required to develop non-infringing technology, which could require significant effort and expense and may ultimately
not be successful. Any of these events could seriously harm our business, operating results and financial condition. Third parties may also assert
infringement claims against our customers and channel partners. Any of these claims could require us to initiate or defend potentially protracted
from claims of infringement of proprietary rights of third parties in connection with the use of our products. If any of these claims succeed, we
may be forced to pay damages on behalf of our customers or channel partners, which could negatively affect our results of operations.
Our use of “open source”
software in our products could negatively affect our ability to sell our products and subject us to possible litigation.
A significant portion of the products, technologies or services acquired, licensed, developed or offered by us may incorporate so-called
“open source” software, and we may incorporate open source software into other products in the future. Such open source software is generally
licensed by its authors or other third parties under open source licenses, including, for example, the GNU General Public License, the GNU
Lesser General Public License, “Apache-style” licenses, “BSD-style” licenses and other open source licenses. We monitor our use of open
source software in an effort to avoid subjecting our products to conditions we do not intend. Although we believe that we have complied with
our obligations under the various applicable licenses for open source software that we use, there is little or no legal precedent governing the
interpretation of many of the terms of certain of these licenses, and therefore the potential impact of these terms on our business is somewhat
unknown and may result in unanticipated obligations regarding our products and technologies. For example, we may be subjected to certain
conditions, including requirements that we offer our products that use the open source software for no cost, that we make available source code
for modifications or derivative works we create based upon incorporating, using or distributing the open source software and/or that we license
such modifications or derivative works under the terms of the particular open source license. Any of these obligations could have an adverse
impact on our intellectual property rights and our ability to derive revenue from products incorporating the open source software.
If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of
one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations. Although we have
impact on our results of operations or financial condition have been taken. However, there can be no assurance that actions will not be taken in
the future. If our defenses were not successful, we could be subject to significant damages, enjoined from the distribution of our products that
contained the open source software and required to comply with the foregoing conditions, which could disrupt the distribution and sale of some
of our products. In addition, if we combine our proprietary software with open source software in a certain manner, under some open source
licenses we could be required to release the source code of our proprietary software, which could substantially help our competitors develop
products that are similar to or better than ours.
In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party
commercial software, as open source licensors generally do not provide warranties or assurance of title or controls on origin of the software. In
addition, many of the risks associated with usage of open source such as the lack of warranties or assurances of title, cannot be eliminated, and
could, if not properly addressed, negatively affect our business. We have established processes to help alleviate these risks, including a review
process for screening requests from our development organizations for the use of open source and conducting appropriate due diligence of the
use of open source in the products developed by companies we acquire, but we cannot be sure that all open source software is submitted for
approval prior to use in our products or is discovered during due diligence.
to additional risks and challenges, which could result in increased development expenses, delays or disruptions to the release or distribution
of those software solutions, and increased competition.
In September 2009, we completed our acquisition of SpringSource and, in February 2010, we completed our acquisition of Zimbra. In April
2011, we launched our Cloud Foundry PaaS offering. We offer each of the product offerings under open
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