VMware 2010 Annual Report Download - page 23

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and other information relating to 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.
We are, and may in the future be, subject to claims by others that we infringe their proprietary technology which could force us to pay
damages or prevent us from using certain technology in our products.
Companies in the software and technology industries own large numbers of patents, copyrights, trademarks, and trade secrets and
frequently enter into litigation based on allegations of infringement or other violations of intellectual property 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.
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. Additionally, open source technology underlies the
offerings of SpringSource and Zimbra, businesses we have acquired since 2009. 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 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, using or distributing the open source software and/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.
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