Amazon’s AWS cloud service has been a significant success for the company, with Jeff Bezos revealing in April that it is now a $5 billion a year business. However, some have raised concerns that the IP non-assert provision in the AWS standard customer agreement may prove problematic for those who have signed up. Among them is Bart Eppenauer, former chief patent counsel at Microsoft and now managing partner of law firm Shook Hardy & Bacon’s Seattle office. Here he explains why he believes that entities using AWS services should be wary of the agreement’s terms:
The AWS Customer Agreement includes a “License Restrictions” provision in Section 8.5. Among several restrictions on the use of AWS, such as no tampering, reverse engineering, etc. of software included in AWS, Amazon has included an exceedingly broad IP non-assert provision that prevents a customer from asserting its IP against Amazon, or any other AWS customer or partner, regarding the use of AWS. Specifically, the second to last sentence of Section 8.5 states:
During and after the Term, you will not assert, nor will you authorize, assist, or encourage any third party to assert, against us or any of our affiliates, customers, vendors, business partners, or licensors, any patent infringement or other intellectual property infringement claim regarding any Service Offerings you have used.
AWS customers should have several issues with this IP non-assert provision:
First is the duration – the provision seems to apply even after a customer stops using AWS.
Second is the broad scope of the provision – it applies not only to Amazon but to pretty much anyone else who uses or is somehow involved with AWS, and it applies on a worldwide basis.
Third, especially troubling is that the AWS Customer Agreement is a click-through consent, so if a single employee agrees to it, for example, Amazon might argue that the intellectual property of the entire company that employs the user is implicated.
Lastly, it’s well known that AWS utilises and hosts a wide range of open source code which could include viral OSS licences that might further extend the reach of the IP non-assert in unforeseen and unpredictable ways.
Some people have downplayed these concerns, believing that Amazon would never try to enforce such an onerous provision. Unfortunately, that’s not true. Amazon is using the provision to defend itself in a patent infringement case brought by Appistry Inc in US district court in Seattle. That case is still pending, and it remains to be seen if Amazon’s use of the provision will defeat Appistry’s lawsuit. However, AWS customers should understand that this is not simply a defensive provision – Amazon can invoke this clause even if it first files a patent infringement suit against a customer.
I can safely say that I have never seen such a broad IP non-assert provision in a standard form contract. These types of IP non-assert provisions were more common 10-15 years ago. For example, Microsoft did have a provision somewhat like Amazon’s in the late 1990s and early 2000s, but it was narrower in scope and only applied to Windows device manufacturers, not end customers. Microsoft received objections from its partners about the provision, and eventually removed it.
The bottom line is that businesses are increasingly looking to the cloud as a place to innovate and differentiate from competitors. The cloud is the place where businesses are rapidly building and storing digital assets protectable by intellectual property rights. It’s likely that thousands of Amazon customers don’t realise they are giving away their valuable intellectual property rights just for the privilege of using AWS; but realise they should.