VMware 2013 Annual Report Download - page 28

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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 and costly litigation on their behalf, regardless of the merits of these claims, because we generally
indemnify our customers and channel partners 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 most 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, 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 received inquiries regarding
open source license compliance for software used in our products, no formal legal proceedings that would have a material impact on our results of operations
or financial condition have been filed. 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. We could also be enjoined from the distribution of our products that contained the open source software or be
required to modify our products in order to comply with the conditions of the open source license(s) in question, thereby disrupting 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 exposes us to risks that differ from the use of third-party commercial
software because 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 software 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 address 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 software in the products
developed by companies we acquire, but we cannot ensure that our processes will be sufficient, all open source software will be submitted for approval prior
to use in our products, or all open source software is discovered during due diligence.
We offer a number of products under open source licenses that subject us 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.
Several of our product offerings are distributed under open source licenses. Additionally, in July 2012, we acquired Nicira whose expertise is in
software-defined networking and whose principal products contain some open source software. Software solutions that are substantially or mostly based on
open source software subject us to a number of risks and challenges:
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