Microsoft’s Azure IP Advantage programme puts Amazon’s AWS cloud offering under pressure

Microsoft’s recent launch of its Azure IP Advantage programme for the company’s cloud customers has generated a great deal of coverage. On the IAM blog, we argued that it once again showed the company to be a world leader when it comes to creating value from its patent portfolio. Regular IAM blog contributor and former Microsoft chief patent counsel Bart Eppenauer – now managing partner of the Seattle office of Shook Hardy & Bacon – has put together a piece for us that explains why that is undoubtedly the case. Equally as important, however, is his observation that the Azure programme puts Microsoft way out ahead of the current number one cloud service provider, Amazon and its AWS programme, as well as (to a lesser extent) Google.

In fact, such is the gap in what Microsoft and Amazon are offering, argues Eppenauer, that the latter may now have no option but to come up with a new set of provisions in the AWS customer agreement. Here is what Eppenauer has to say:  

Now, more than ever, businesses are looking to the cloud as a place to innovate and differentiate from competitors.  As a result, competition in the cloud market is steep and only growing more so.  Microsoft recently made news in announcing the Azure IP Advantage programme.  I consider this a major step forward by the company in creating even more business value from its IP portfolio. 

Azure customers should really appreciate these benefits as it’s the most comprehensive set of offerings I’ve ever seen to address IP risks in the cloud.  Under Microsoft’s new programme, Azure customers will receive uncapped indemnification (including coverage for open source technology), access to 10,000 Microsoft patents via a “Patent Pick” in order to deter and defend lawsuits, and a springing licence in the unlikely event that Microsoft transfers one of its patents to a non-practising entity (NPE).  As competition heats up in the cloud computing realm, the company has clearly differentiated itself in terms of customer protection against an ever-growing IP threat on cloud-related technologies.

One aspect of the programme launch that caught my eye was Microsoft’s statements that it does not require customers to “give up” their IP rights as part of this offering.  Even though Microsoft took the high road in focusing on customer value, I view its words as a pretty clear reference to Amazon, which has an incredibly broad IP non-assert provision in its AWS customer agreement.   I wrote about that provision last year in an IAM blog post, and Amazon still has not backed down – it continues to require customers to give up their IP for the rights to use AWS.   Microsoft obviously saw this as well and is highlighting the difference between the approaches that the two leading cloud platform competitors take with respect to IP.  In essence, Microsoft is saying: “We share our IP with our customers to help them, while Amazon takes its customers’ IP away.” 

Looking at this more precisely, if you compare Microsoft to Amazon now, what you find is that Amazon is way behind in terms of customer IP protection.  Microsoft offers customers uncapped indemnity, with coverage for included open source elements, the “Patent Pick” right, and the springing licence, all as a feature of Azure and part of the Azure IP Advantage programme.   Amazon offers none of these benefits – and here is the amazing part: it continues to insist that customers license their IP back to Amazon and all other AWS customers simply for the privilege of using AWS.  

Microsoft has also opened a competitive gap with Google, but it’s not as substantial.  Google offers some indemnification and does not require customers to license back their IP under the Google Cloud Platform terms.  They are also part of the LOT Network which provides a springing licence for other LOT members, but requires a reciprocal commitment to grant a springing licence back.  What Google does not have today is indemnification coverage for open source elements, a patent pick or a unilateral springing licence component with no reciprocal commitment. 

So where is this likely to go?  It will be interesting to see if Amazon responds anytime soon.  As the market leader, it may take a “wait and see” approach.  But, if this turns out to be a significant competitive differentiator for a company that is its nearest competitor and rapidly gaining ground, then the company will need to respond. 

My guess is Amazon’s first move will be to perhaps add some level of customer indemnification.  It is also part of the LOT Network, so is likely to stick with that and not offer a unilateral springing licence in the near term.  Amazon’s biggest challenge will be trying to match Microsoft’s “Patent Pick”.  Microsoft is putting up a portfolio of 10,000 patents, which is larger than Amazon’s entire worldwide portfolio (at least according to public records that I could access).  And the “Patent Pick” portfolio is a strong one, as noted in this TechInsights report.  We’ll also have to see whether Amazon is willing to move away from its unpopular IP non-assert clause.  It’s likely that Amazon will have to chase Microsoft’s tail lights for quite some time in this particular race if they try to compete on the customer IP protection front.