News

Microsoft Kicks Off Legal Indemnity Program for Azure Users

• By Kurt Mackie
• 02/08/2017

Microsoft today initiated a new program that promises legal indemnification protections against intellectual property (IP) claims for organizations using Microsoft Azure services.

The program, called "Microsoft Azure IP Advantage," takes effect today for Azure users. However, they need to meet certain qualifications to get some of the program's protection benefits.

Three Protections
There are three basic elements to the program. First, Microsoft is promising to include IP protections for its patented technologies, as well as open source technologies, used in Azure. Next, Microsoft is promising to keep a pool of patents for legal defensive purposes. Organizations can pick one patent to use for countersuing purposes. Lastly, Microsoft is promising that if it transfers Azure-associated patents to "nonpracticing entities," then the arrangement will be such that the holding company can't assert IP claims against Azure customers. This latter arrangement is called a "springing license" arrangement in legal lingo.

One example of IP protections enabled by the program for open source software is the use of open source Hadoop technology, according to Microsoft's announcement. Hadoop is used in Microsoft's Azure HD Insight "Big Data" services, so the program affords indemnity protections for Azure HD Insight users.

Microsoft is promising to keep a pool 10,000 patents out of its total holdings of 60,000 patents (as of Feb. 8, 2017) that organizations can use for legal defensive purposes. Initially, 7,500 patents will be available, but Microsoft plans to add 2,500 patents "in a few months" to the pool, according to its Azure IP Advantage Program FAQ. Organizations facing litigation over Azure use can select a patent for defensive purposes if they qualify for that benefit. In essence, they have to have paid at least $1,000 each month for Azure services use over the last three months, and they can't have brought litigation against other Azure workload users over the past two years.

Organizations can't just pick any Microsoft patent for litigation purposes. It has to be "solely for defense of suits against their Azure workloads," Microsoft's FAQ explained. The customer actually owns the patent in such cases, but just pays for the patent administrative transfer costs, per the FAQ. Microsoft retains use rights, though.

"After transferring, the customer owns the patent," a Microsoft spokesperson clarified via e-mail today. "Microsoft retains a license to use the technology."

Microsoft also will provide legal advice and assistance to qualified Azure users facing a lawsuit.

"In indemnification cases Microsoft's legal counsel will generally take over the engagement with the patent aggressor, applying resources legal, IP and engineering support as appropriate," the spokesperson clarified.

The Microsoft Azure IP Advantage Program just applies to lawsuits initiating on or after Feb. 8, 2017. It doesn't apply to prior lawsuits. The program is not available in China.

Nonpracticing Entity Threat
Brad Smith, Microsoft's president and chief legal officer, suggested in a Microsoft video that cloud litigation has been growing, including the threat of baseless lawsuits. It's not just a problem for service providers such as Microsoft, but it's also a potential problem for customers, he suggested.

Smith also suggested that nonpracticing entities, or companies that just hold patents without providing a product or service, were growing their holdings with respect to cloud technologies. He suggested that Microsoft's new program could offer protection in that respect.

"As an engine of innovation, the cloud in our view is too important to be stifled in this way," Smith said, regarding NPE holdings. "That's why, as a company, we at Microsoft are committed to fostering a community and business environment that values and protects our customers and investments in the cloud. That's why we are introducing today a new program called Microsoft Azure IP Advantage."

While Microsoft's announcement mentions that the program has IP protections for open source software used in Azure, that's not Microsoft main motivation. It mostly wants to thwart the IP claims of nonpracticing entities (NPEs).

"The program was created to in response to customer feedback," the spokesperson explained. "The growth of cloud has created an attractive target for NPEs and Microsoft wants to protect customers and get ahead of this emerging trend."

Microsoft lately has embraced open source technologies, especially with regard to Azure, which supports multiple Linux server distros on Azure virtual machines. Azure itself also uses some open source technologies. Microsoft's position on open source software has been evolving from a previous long-term hostility.

On the IP side, Microsoft early on provided "IP peace of mind" by issuing certificates for Novell's SuSE Linux Enterprise server use in a controversial program that promised customers using that software that they would not be subject to IP claims from Microsoft. That program emerged from Microsoft's early legal claims that Linux and other open source software had violated 235 of Microsoft's patents.

One instance where Microsoft pressed its claims, though, concerned the Android open source mobile operating system, fostered by Google. Microsoft typically collected in advance of litigation based on its many IP claims concerning Android use.