VMware 2007 Annual Report Download - page 20

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Table of Contents
We provide access to our hypervisor and other selected source code to partners, which creates additional risk that our competitors could
develop products that are similar or better than ours.
Our success and ability to compete depend substantially upon our internally developed technology, which is incorporated in the source
code for our products. We seek to protect the source code, design code, documentation and other written materials for our software, under trade
secret and copyright laws. However, we have chosen to provide access to our hypervisor and other selected source code to more than 40 of our
partners for co-development, as well as for open APIs, formats and protocols. Though we generally control access to our source code and other
intellectual property, and enter into confidentiality or license agreements with such partners, as well as with our employees and consultants, our
safeguards may be insufficient to protect our trade secrets and other rights to our technology. Our protective measures may be inadequate,
especially because we may not be able to prevent our partners, employees or consultants from violating any agreements or licenses we may have
in place or abusing their access granted to our source code. Improper disclosure or use of our source code could help competitors develop
products similar to or better than ours.
Claims by others that we infringe their proprietary technology could force us to pay damages or prevent us from using certain technology in
our products.
Third parties could claim that our products or technology infringe their proprietary rights. This risk may increase as the number of products
and competitors in our market increases and overlaps occur. In addition, to the extent that we gain greater visibility and market exposure as a
public 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
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 materially reduce our income.
Our use of “open source” software could negatively affect our ability to sell our products and subject us to possible litigation.
A significant portion of the products or technologies acquired, licensed or developed 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, “Berkeley Software Distribution,” “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 such that we have not triggered any
such conditions, 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 or using the
open source
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