VMware 2014 Annual Report Download - page 30

Table of Contents
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, our processes used to monitor how open source software is used could be subject to error. In addition, there
is little or no legal precedent governing the interpretation of terms in most of these licenses. Therefore, any improper usage of open source could
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, that we license such modifications or
derivative works under the terms of the particular open source license, that we revise or modify our product code to remove alleged infringing
code or that we take other steps to avoid or remedy an alleged infringement. Any of these obligations could have an adverse impact on our
intellectual property rights and our ability to derive revenues 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. 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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• If open source software programmers, most of whom we do not employ, do not continue to develop and enhance open source
technologies, our development expenses could be increased and our product release and upgrade schedules could be delayed.
• One of the characteristics of open source software is that anyone can modify the existing software or develop new software that
competes with existing open source software. As a result, competition can develop without the degree of overhead and lead time
required by traditional proprietary software companies. It is also possible for new competitors with greater resources than ours to
develop their own open source solutions, potentially reducing the demand for, and putting price pressure on, our solutions.
• It is possible that a court could hold that the licenses under which our open source products and services are developed and licensed are
not enforceable or that someone could assert a claim for proprietary rights in a program developed and distributed under them. Any
ruling by a court that these licenses are not enforceable, or that open source components of our product or services offerings may not be
liberally copied, modified or distributed, may have the effect of preventing us from distributing or developing all or a portion of our
products or services. In addition, licensors of open source software employed in our offerings may, from time to time, modify the terms
of their license agreements in such a manner that those license terms may no longer be compatible with other open source licenses in
our offerings or our end-user license agreement or terms of service, and thus could, among other consequences, prevent us from
continuing to distribute the software code subject to the modified license or terms of service.