New Microsoft patent program aims to give Azure cloud developers security from patent lawsuits

“Secure Cloud – Data Security – Cyber Security” by Blue Coat Photos. Licensed under CC BY-SA 2.0.

On Wednesday, February 8th, the official blog for Microsoft Corporation (NASDAQ:MSFT) published a post penned by Microsoft president and chief legal officer Brad Smith announcing the launch of the Azure IP Advantage program. The program seeks to provide resources to Azure cloud subscribers that will help them “address the growing risk of intellectual property lawsuits in the cloud,” although some news outlets are misinterpreting the potential value of this system.

Azure IP Advantage is a service, which enables eligible Azure subscribers access to one of 10,000 patents, 7,500 of which were available at the program’s launch, to counter-assert against anyone alleging patent infringement. Microsoft makes a downloadable spreadsheet of the patents included in this portfolio available through the Azure IP Advantage website. To be eligible for the program, subscribers must spend more than $1,000 monthly on Azure, cannot have filed a patent infringement suit against another Azure customer within two years and must show evidence of a current patent litigation occurring after February 8th.

Perhaps the biggest benefit of the Azure IP Advantage program for subscribers is the indemnification component. The program includes uncapped indemnification coverage, which will now cover any open source technology that powers Microsoft Azure services, such as Hadoop used for Azure HD Insight.

Another unique aspect of the program is a springing license, which Microsoft is offering to those Azure customers who are eligible for the IP Advantage program. This springing license would come into play in case Microsoft ever decides to sell any of the patents in the IP Advantage portfolio. Microsoft is guaranteeing that, should any of those patents be transferred to another entity, they wouldn’t be enforceable against Azure customers. Eligibility for the springing license requires an Azure user to spend $1,000 within three months on the cloud platform.

In the post announcing Azure IP Advantage, Smith cites statistics from Gartner forecasting $1 trillion in cloud-related IT expenditures, which will occur by the year 2020. As more money enters the sector, Microsoft notes a 22 percent increase in cloud-related patent suits in the past five years, according to the Boston Consulting Group. Further, Microsoft cites a statistic that non-practicing entities (NPEs) have increased their acquisition of cloud-related patents by 35 percent over that same time frame.

Of course, it only takes the whisper of NPE activity to bring forth a deluge of chatter on “patent trolls,” the asinine boogeyman propped up by a wide array of people commenting on the current U.S. patent landscape. Articles published by ZDNet, The Stack and many other online tech publications are trying to push a narrative that Azure IP Advantage offers protection against patent trolls. But the instant a party files an actual patent infringement suit things get more complicated. Regardless of what many in the tech sector and media would like you to believe, just because you own a patent or file a patent infringement lawsuit does not mean you are a patent troll. While it is impossible for many to comprehend, it is perfectly reasonable and possible that a patent owner who is not actually a patent troll could and would bring a patent infringement lawsuit because, for example, there is actually ongoing patent infringement of a valid patent. So it is misleading to say, suggest or believe that those who sue are necessarily bad actors when in fact the overwhelming majority of patent owners are legitimate property right owners who just want a court to adjudicate whether actual infringement of the patent has occurred.

Generally speaking, patent trolls operate by extorting nuisance payments, which is accomplished by sending demand letters without ever once intending to actually file a suit. Indeed, many patent trolls never file a lawsuit. There are some bad actors that should rightfully be labeled as patent trolls who will file patent infringement lawsuits, and they can typically be spotted miles away because they offer quick settlements for a few thousand dollars, sometimes $10,000 or $25,000. None of this is to say that the Azure IP Advantage doesn’t provide actual security to cloud-based developers targeted by a patent suit, but it is a mistake to believe that all patent owners who bring a patent infringement lawsuit will be patent trolls.

The springing license does offer at least some protection in the future against patent aggregators looking to monetize IP assets, but it wouldn’t stop any party, including an actual patent troll, from sending a demand letter asserting rights to a patent outside of the Azure IP Advantage portfolio. But, how those in the program can use one of Microsoft’s patents to defend against a patent troll seems rather questionable. By definition a patent gives the owner the right to do nothing other than exclude. So even if you have lawfully acquired rights through the owner you’ve acquired no affirmative rights, just a promise from the owner that they won’t exclude you from what it is that you are doing. Therefore, you cannot defend a patent litigation against a patent troll or any patent owner by pointing to a patent you have rights to use because that isn’t how a patent works.

Even with the rights to the Azure IP portfolio it is still entirely possible that other patent rights would be infringed. And having patent rights to assert won’t help against a true patent troll, or even a non practicing entity, because by definition they are not engaging in any activity themselves so they wouldn’t be infringing. So while access to the Azure IP portfolio is no doubt valuable, subscribers really should understand what it is that they are receiving and not mistakenly believe they are getting some kind of litigation insurance or bullet proof defense from nefarious actors like patent trolls, or any other patent owner who seeks to assert legitimate rights for true infringement. While there is uncapped indemnification coverage will now also cover any open source technology that powers Microsoft Azure services, it is hard to see how one could use a patent against a patent troll or non-practicing entity to defend a patent litigation.

UPDATED at 1:05pm ET on Friday, February 10, 2017, to mention the indemnification program and to remove references to the Azure program being a licensing program, which was not technically accurate. Updated again at 1:57pm ET to remove the word “licensing” from the title.