The Cloud: Is it the Next Intellectual Property Battleground?

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As the smartphone patent war era slows down (with some exception), the next big and unruly intersection of computing tech and intellectual property rights (IPR) is taking place in the cloud. There will likely be less drama than in smartphone litigation, but sorting out IP for cloud computing has the potential to be just as, if not more, messy.

The smartphone wars were, in part, an exercise in institutional buildup of cross-licensing agreements among tech giants who previously had no reason to play together in the same sandbox. Who knew that there would be a phone that also ran application software, stored media files, played back video and audio, and captured images (still and moving)? Because that cross-licensing defensive line is now built up, the IPR smartphone fights are (mostly) a thing of the past.

Enter cloud computing. It’s not about devices and discreet components, but about systems and their underlying software. Systems are made up of software, and most software is designed to enable automation and interact with devices, services and other systems. Don’t forget software is now supposed to learn from other software systems and machines, too.

Consider that businesses operating in the cloud are buying services from cloud platform suppliers like Microsoft Azure, AWS Amazon Cloud and Google Cloud Platform to build their own proprietary services. The platform providers and the cloud services providers (their customers) both mix proprietary and open-source software elements into their offerings. Add to this the uncertainty around which parties are responsible for possible infringement of someone else’s property and in what country/region the infringement actually occurred, and it doesn’t take much imagination to see how this could result in a tangled IP mess.

In the cloud business’ beginning days, the most pressing legal concerns had to do with security and privacy. IPR kind of took a back seat. IP-infringement risk management has recently come to the foreground and the platform service providers are jockeying for position as the best “protectors” for potential customers.

To that end, protection against IP litigation, in addition to protection against data and privacy breeches, is the latest competitive tool the cloud platform giants are using to gain market share. Earlier this year, Microsoft unveiled a program called Azure IP Advantage that promises “uncapped indemnification” to its customers building cloud services with Azure. The industry activity may very well spring from a significant amount of industry criticism regarding Amazon’s former Cloud IPR policy. Amazon recently made changes that provided better terms to its customers, signaling an industry-wide effort to calm the nerves of customers and add another checkbox to the marketing materials.

These policies are designed to keep cloud service providers from being caught in the crossfire if there are infringement “flare ups” associated with the platform service providers’ IP. Some critics, however, warn that cloud service providers partnered with a platform provider should understand that these policies don’t represent iron clad insurance against getting sued for patent infringement. In the case of Azure, for example, if the customer is sued because it used Azure, the Microsoft policy provides that customer with indemnification and will cover legal costs. If, however, that customer is sued “because it used Azure to innovate in the cloud (and that includes the customers’ software/data),” then there appears to be no protection. It seems the latter and not the former is the more likely scenario. As an aside: Microsoft has gotten high comparative marks against their main competitors when it comes to the strength of their cloud-related patent portfolios and subsequent protection offered to customers.

Knowing that they are building their cloud services on a platform service providers’ solid IP foundation should help alleviate cloud provider anxiety when wading into the cloud-computing IP waters. But service providers should read the fine print when these computing giants promise protection against breeches in security, privacy and intellectual property. Guarantees are hard to come by.

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