MSFT Microsoft Corporation

By Jay Greene 

Microsoft Corp. on Wednesday broadened the patent-lawsuit protection it offers its cloud-computing customers, aiming to keep intellectual-property litigation from curtailing adoption of its Azure service.

The program, called Microsoft Azure IP Advantage, provides uncapped indemnification coverage -- payment for legal costs -- to customers that develop cloud applications using open-source technologies such as Hadoop, a tool used to analyze large amounts of data.

Microsoft already provides such a service for Azure customers developing apps using Microsoft technology. In its most recent quarter, revenue for Microsoft's Intelligent Cloud segment, which includes Azure, rose 8% to $6.9 billion, about 28% of the company's overall sales.

The offering is the first of its kind, according to Forrester Research Inc. analyst Jeffrey Hammond. While intellectual-property suits targeting open-source tech use in the cloud aren't common, the service could still lure customers, particularly those averse to risk, he said.

"If you're one of those 25 to 30 companies that it's happened to, it really matters to you," Mr. Hammond said.

IP Advantage is free for customers spending $1,000 or more a month using the web-based, on-demand computing offering -- the vast majority of Azure customers, Microsoft said.

Microsoft will make 10,000 of its patents available to Azure customers who qualify for IP Advantage, a move aimed at helping defend against intellectual-property litigation. The offering broadly represents Microsoft's roughly 65,000 patents held world-wide, the company said.

A common defense for companies accused of patent infringement is to find one of its own patents the accusing company has infringed upon and propose cross-licensing deals that keep both companies out of court.

In an interview, Microsoft President and Chief Legal Officer Brad Smith said he expects these types of patent suits to increase as cloud computing grows. Tech research firm International Data Corp. forecasts spending on cloud infrastructure will hit $60.8 billion in 2020, pulling even with traditional infrastructure.

"It's not hard to predict the kinds of problems that are going to happen in the future," Mr. Smith said.

He believes the problem could be particularly acute for non-tech companies that are building cloud services, but haven't armed themselves with a passel of patents.

Mattel Inc., for example, is developing a child-monitoring device called Aristotle that includes a voice-activated speaker that can automatically play a lullaby when babies wake up, or play guessing games with older children. It uses Azure for those services.

Geoffrey Walker, Mattel's chief strategic technology officer, expects IP Advantage to protect the company. "It allows us to focus on other areas, and that's innovation and creativity," Mr. Walker said.

Write to Jay Greene at Jay.Greene@wsj.com

(END) Dow Jones Newswires

February 08, 2017 09:14 ET (14:14 GMT)

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