VMware 2009 Annual Report Download - page 22

Table of Contents
issued patents may not provide us with proprietary protection or competitive advantages, and, as with any technology, competitors may be able
to develop similar or superior technologies to our own now or in the future. 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 and proprietary rights is expensive, difficult and, in
some cases, impossible. Litigation may be necessary in the future 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. Such litigation could result in substantial costs and diversion of
management resources, either of which could harm our business, financial condition and results of operations, and there is no guarantee that we
would be successful. Furthermore, many of our current and potential competitors have the ability to dedicate substantially greater resources to
protecting their technology or intellectual property rights than we do. Accordingly, 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.
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 50 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, 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 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.
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