Wednesday, May 02, 2018

State of Intellectual Property protection, or lack of thereof, by cloud services providers

In 2015 AWS started making the news regarding its aggressive “Non-Assert Clause” in its terms of services. This type of clause exists to protect the cloud providers from being sued for patents, copyrighted works or trademarks infringement by their customers in perpetuity. 

Now, most explanations given for the use of these type of clause tends to revolve around open source and patent troll defence. While patent troll defence is rather obvious, open source defence is slightly more tenuous but still valid. If Amazon uses your open source (in some way that is a violation of the license), and you use AWS, you can't sue them. 
However, it became slightly more difficult to digest when such clause is used to fight a patent suit. Which indicate that any cloud provider using such clause could duplicate your products without fear of legal repercussion.

Fast forward a couple of years later, AWS start to feel a little bit more pressure from its competitor and drops its controversial clause in July 2017. This is perceived to be a move to woo the more traditional enterprise market that starts to adopt cloud deployment. The objective is to reassure more legally astute customers.
A month later AWS also decided to mimic to some extent Microsoft Azure patent protection scheme. While not as extensive as Azure offering this is still a start. Microsoft IP shared protection is far more comprehensive than AWS as it expands the company’s existing indemnification policy to include its patents portfolio available to Azure customers to help defend themselves from possible infringement suits; and pledges to Azure customers that if Microsoft sells patents to an NPE they can never be asserted against them. 
The shared protection scheme is quite attractive as well as dangerous for the provider. If one customer falls prey to an IP lawsuit and loses because of a cloud provider infringement. This can become really quickly a complete bloodbath as every customer might become a target. Because of such scheme, the cost can easily snowball. As a result, I can only foresee the biggest player in the fields offering such protection.

I decided to do a quick check to see the current state of the cloud provider terms of services regarding IP protection or lack of thereof. I specifically focused on trying to pinpoint which one used the “Non-Assert Clause” and which one offer Share protection ( to varying degree) in the Table below. 

Cloud Provider
Share protection
No Non-Assert Clause
🗸 (since Aug 2017)
🗸 ( since July 2017)
Digital Ocean
Clause 15.2
Clause 10.3
OVH (VmWare)
Alibaba Cloud

Disclaimer: I am not a lawyer, and this is based on documents available at the time of publication. The terms can change at any time and you are free to try to negotiate terms with your cloud providers yourself. In any case, I recommend having a qualified lawyer to give you advice on this matter.

The result: Pretty much all cloud provider DO NOT use Non-Assert clause except two: Digital Ocean and SAP. While I would understand why Digital Ocean might do that based on their business model and market size. SAP seems a little bit more surprising in their aggressive stance. However, its customers tend to be more legal savvy and might negotiate the clause out more easily.
When it comes to shared protection scheme, half of the provider do not mention any shared protection scheme. As for the other half, your mileage may vary. Azure offer the most comprehensive one. While most of the others that do offer a protection tend to offer legal and/or financial support only.

It is clear that, as more institutional customer move to the cloud, providers will gradually need to offer more legal protection regarding intellectual property risks. However, this might come at a cost and risk that only the biggest one will be able to bear.

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