Microsoft adds patent suit protections for cloud customers

Microsoft will help cloud customers fend off patent lawsuits and expand coverage of related litigation costs, seeking to distinguish its services from rivals in the fast-growing market for internet-based computing.

As more companies host their applications and services on Microsoft's Azure and other cloud providers, they are increasingly becoming the target of lawsuits from companies seeking to make money by claiming patent infringement. Microsoft, the second-biggest cloud infrastructure services vendor behind Amazon.com, will help customers fight back by offering them one of its own patents to deter or defeat such suits.

The software giant will also expand a program in which Microsoft provides funds or legal resources to fend off claims, known as indemnification.

The patent protection can provide an edge for Microsoft as the company competes with Amazon and Google in the cloud. As IT spending in the cloud is set to reach $1 trillion by 2020, according to Gartner, the industry faces growing risks of intellectual property lawsuits. Such suits have risen 22 percent in the past five years, according to the Boston Consulting Group. Meanwhile, non-practicing entities -- the industry's term for firms that snap up patents to garner licensing fees and launch lawsuits -- boosted their acquisition of such patents by 35 percent in the same period. "We create a patent umbrella and we let our customers stand underneath it," said Microsoft President and Chief Legal Officer Brad Smith, in an interview. Because of its strong patent portfolio and experience in patent law, Microsoft can "play a positive and constructive role of helping our customers."

Cloud computing is letting companies in a variety of industries move into technology development by building their own applications using Microsoft or Amazon's server farms, storage and pre-written services.

The problem is that these businesses don't have their own technology patents to defend against companies that might sue them. That's where Microsoft wants to stand out above its cloud rivals, who don't offer the same level of protection, said Julia White, a Microsoft vice president for Azure marketing.

"All of our customers are at some level becoming software providers of their own," White said. "That puts them in a different domain -- an area where they don’t have a lot of experience."

Microsoft already offered the indemnification benefit to customers who use Azure cloud services written by Microsoft. The expansion adds protections for those who use open source technologies offered through Azure like Hadoop and Apache. Google offers indemnification but not on open source software.

The patent program is new to Microsoft and hasn't really been tried in the industry more broadly, according to Smith. Customers will be able to pick one patent from a pool of 10,000 offered -- Microsoft has 60,000 patents total -- to use in their defense. Microsoft is hoping that the mere existence of the offer will deter suits in the first place.