VMware 2014 Annual Report Download - page 29

Table of Contents
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 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 to or better than ours.
Our success and ability to compete depend substantially upon our internally developed technology, which in some cases is incorporated in
the source code for our products. We seek to protect the source code, design code, documentation and other information relating to our software,
under trade secret, copyright, and other applicable laws. However, we have chosen to provide access to our hypervisor and other selected source
code to several dozen 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, this combination of procedural and contractual 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 or contribute to the infringement of 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 as computing, networking, storage, and software technologies increasingly converge. This
risk may also increase as a result of our increasing presence in the mobile enterprise management space. The threat of intellectual property
infringement claims against us may increase in the future because of constant technological change in the segments in which we compete,
extensive patent coverage of existing technologies and the rapid rate of issuance of new patents. Additionally, there is an increased risk that our
competitors will use their intellectual property rights to limit our freedom to operate and exploit our products or to otherwise block us from
taking full advantage of our markets.
In addition, as a well-known information technology company, we risk being the subject of an increasing number of intellectual property
infringement claims, including claims by entities that do not have operating businesses of their own and therefore limit our ability to seek
counterclaims for damages and injunctive relief. 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 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
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