VMware 2012 Annual Report Download - page 27

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Table of Contents
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 in our products could negatively affect our ability to sell our products and subject us to possible litigation.
A significant portion of the products, technologies or services acquired, licensed, developed or offered 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, “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 most 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.
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, enjoined from the distribution of our
products that contained the open source software and required to comply with the foregoing conditions, which could disrupt 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 all open source
software is submitted for approval prior to use in our products or is discovered during due diligence.
We offer a number of products, including our SpringSource, Zimbra and Cloud Foundry 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, including our offerings that utilize our SpringSource, Zimbra
and Cloud Foundry software. Additionally, in July 2012, we acquired Nicira whose expertise is in software-defined networking and whose
principal products contain some open source software. Software solutions that are substantially or mostly based on open source software subject
us to a number of risks and challenges:
25
• 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