VMware 2015 Annual Report Download - page 18

TableofContents
Ourfailuretomanageanyoftheseriskssuccessfullycouldnegativelyaffectourreputationandadverselyaffectouroperatingresults.
Our current research and development efforts may not produce significant revenues for several years, if at all.
Developingourproductsandservicesisexpensive.Inparticular,developingandlaunchingdisruptivetechnologiesinnewareas,aswearecontinuingtodo
withourVMwareNSXvirtualnetworkingandvSANvirtualstorageinitiatives,requiressignificantinvestmentsofresourcesandoftenentailsgreaterriskthan
incrementalinvestmentsinexistingproductsandservices.Ourinvestmentinresearchanddevelopmentmaynotresultinmarketableproductsorservicesormay
resultinproductsandservicesthatgeneratelessrevenuesthanweanticipate.Ourresearchanddevelopmentexpenseswereapproximately20%ofourtotal
revenuesduringtheyearendedDecember31,2015.Ourfutureplansincludesignificantinvestmentsinsoftwareresearchanddevelopmentandrelatedproduct
opportunities.Webelievethatwemustcontinuetodedicateasignificantamountofresourcestoourresearchanddevelopmenteffortstomaintainourcompetitive
position.However,wemaynotreceivesignificantrevenuesfromtheseinvestmentsforseveralyears,ifatall.
We may not be able to adequately protect our intellectual property rights.
Wedependonourabilitytoprotectourproprietarytechnology.Werelyontradesecret,patent,copyrightandtrademarklawsandconfidentialityagreements
withemployeesandthirdparties,allofwhichofferonlylimitedprotection.Assuch,despiteourefforts,thestepswehavetakentoprotectourproprietaryrights
maynotbeadequatetopreventmisappropriationofourproprietaryinformationorinfringementofourintellectualpropertyrights,andourabilitytopolicesuch
misappropriationorinfringementisuncertain,particularlyincountriesoutsideoftheUnitedStates.Inaddition,werelyonconfidentialityorlicenseagreements
withthirdpartiesinconnectionwiththeiruseofourproductsandtechnology.Thereisnoguaranteethatsuchpartieswillabidebythetermsofsuchagreementsor
thatwewillbeabletoadequatelyenforceourrights,inpartbecausewerelyon“click-wrap”and“shrink-wrap”licensesinsomeinstances.
Detectingandprotectingagainsttheunauthorizeduseofourproducts,technologyproprietaryrightsandintellectualpropertyrightsisexpensive,difficultand,
insomecases,impossible.Litigationisnecessaryfromtimetotimetoenforceordefendourintellectualpropertyrights,toprotectourtradesecretsortodetermine
thevalidityandscopeoftheproprietaryrightsofothers.Despiteourefforts,wemaynotbeabletopreventthirdpartiesfrominfringinguponormisappropriating
ourintellectualproperty,whichcouldresultinasubstantiallossofourmarketshare.
Our use of “open source” software in our products could negatively affect our ability to sell our products and subject us to litigation.
Manyofourproductsandservicesincorporateso-called“opensource”software,andwemayincorporateopensourcesoftwareintootherproductsand
servicesinthefuture.Opensourcesoftwareisgenerallylicensedbyitsauthorsorotherthirdpartiesunderopensourcelicenses.Opensourcelicensorsgenerally
donotprovidewarrantiesorassuranceoftitleorcontrolsonoriginofthesoftware,whichexposesustopotentialliabilityifthesoftwarefailstoworkorinfringes
theintellectualpropertyofathirdparty.
Wemonitorouruseofopensourcesoftwareinanefforttoavoidsubjectingourproductstoconditionswedonotintendandavoidexposingustounacceptable
financialrisk.However,theprocesseswefollowtomonitorouruseofopensourcesoftwarecouldfailtoachievetheirintendedresult.Inaddition,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termsinmostoftheselicenses,whichincreasestheriskthatacourtcouldinterpretthelicensedifferentlythanwedo.
Fromtimetotime,wereceiveinquiriesorclaimsfromauthorsordistributorsofopensourcesoftwareincludedinourproductsregardingourcompliancewith
theconditionsofoneormoreopensourcelicenses.Anadverseoutcometoaclaimcouldrequireusto:
• paysignificantdamages;
• stopdistributingourproductsthatcontaintheopensourcesoftware;
• reviseormodifyourproductcodetoremoveallegedinfringingcode;
• releasethesourcecodeofourproprietarysoftware;or
• takeotherstepstoavoidorremedyanallegedinfringement.
InMarch2015,asoftwaredeveloperwhoallegesthatsoftwarecodehewroteisusedinacomponentofourvSphereproductfiledalawsuitagainstusin
GermanyallegingcopyrightinfringementforfailingtocomplywiththetermsofanopensourcelicenseGeneralPublicLicensev.2(“GPLv.2”)andseekingan
orderrequiringustocomplywiththeGPLv.2orceasedistributionofanyaffectedcodewithinGermany.Althoughwebelievethattheclaimsinthislawsuitlack
meritandintendto
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