Matthew A. Levy is a Patent Attorney and Former IBM Software Engineer.
The cloud has gone from being a buzzword to being a central part of the modern economy. Since businesses in nearly every industry use the cloud, Amazon Web Services (AWS), Microsoft’s Azure, Google Cloud Platform and IBM Cloud Services are each making aggressive market plays to compete for customers.
This provides more opportunity than ever for developers, start-ups, and existing companies to leverage the power of the cloud. Unfortunately, there is a fly in the cloud’s Chardonnay, if you will – the threat of patent suits.
There are major benefits to the cloud, but using it successfully can disrupt existing industries, which might trigger a competitor to respond by filing a patent infringement suit. And patent trolls are always lurking, ready to siphon off money from businesses.
For example, a patent troll called Autumn Cloud has sued several dozen companies using patents from 2002. Autumn Cloud has sued banks, travel sites, video streaming sites and social media platforms, all based on their use of cloud services to provide mobile apps to their customers. Just operating in the cloud successfully attracted a patent troll; and Autumn Cloud is just one of many.
This means that patent suits are a real risk that companies need to consider when entering the cloud. Patent trolls, also called “patent assertion entities,” have 15 or 20 year-old Internet and computing patents that could read on the cloud. Ongoing businesses may also have portfolios with older patents that potentially cover cloud technology.
Companies shouldn’t be deterred from leveraging the cloud, but they need to consider the risks as part of their business planning.
There is a real opportunity here for providers. The cloud can only grow if new businesses adopt it. And if new businesses get scared off by the threat of patent lawsuits – well, that’s an obvious problem. There are three main cloud providers: Amazon Web Services (AWS), Microsoft, and Google. Only one – Microsoft – is addressing cloud IP risks for its customers.
Microsoft recently announced a patent protection program called Azure IP Advantage, which includes three main protections for its cloud customers:
- Microsoft indemnifies all Azure customers for any intellectual property claim, including patent infringement, based on the Azure platform. This includes open source products and there is no limit to how much Microsoft will spend defending the claim.
- If a “consuming customer” is sued for patent infringement, they can select a patent (a “patent pick”) from a set of 10,000 patents to use to defend itself. (A “consuming customer” is a customer who spends a certain minimum on cloud services.)
- Every consuming customer gets a “springing license” to Microsoft’s patent portfolio, meaning if any Microsoft patent ends up in the hands of a patent troll, the customer is automatically licensed.
It’s also interesting that Microsoft is trying to discourage patent litigation among Azure customers. The patent pick isn’t available for companies that have sued Microsoft or Azure customers within the past two years, turning Azure into a safe community all around.
While Google doesn’t provide as robust a solution to IP risk, it does indemnify its cloud customers against patent infringement, and there’s no limit to the amount of indemnification. However, the company excludes any open source software included in Google Cloud Platform. Those exclusions are a big potential problem for customers that use things like Hadoop or other Apache products.
Until just last month, AWS offered customers no protections whatsoever against patent infringement suits, and it even required customers to essentially give up their own IP rights in exchange for Amazon’s services. AWS recently added some basic indemnification to its customer agreement and removed the provision taking customers’ IP rights, probably in response to customer pressure in light of Google and Microsoft’s competitive offerings. It’s good to see that Amazon is beginning to take the IP threat seriously, but it still has a way to go. Like Google, it doesn’t offer any protections for use of open source or other third-party software in connection with AWS.
Looking at the current options for managing IP risk, there’s a clear divide among the leading providers; this means that virtually every company innovating on the cloud is making a decision affecting their IP risk and strategy – whether intentionally or not – when they choose their cloud provider. Given the risks, it’s worth considering the IP benefits provided by the major cloud platforms when choosing a provider.
The good news is that if Microsoft’s Azure IP Advantage succeeds in attracting customers, we can expect to see more competition to better shield customers from patent infringement lawsuits. That would be a good thing all around.
Opinions expressed in the article above do not necessarily reflect the opinions of Data Center Knowledge and Informa.
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