Microsoft threatens lawsuit over $50bn Amazon-OpenAI cloud deal amid partnership dispute

Microsoft weighs legal action over $50bn Amazon-OpenAI cloud deal

Microsoft is weighing legal action against Amazon and OpenAI over a $50bn deal that could breach its exclusive cloud partnership with the ChatGPT maker, setting up a clash between the Big Tech rivals. The dispute centres on whether Amazon Web Services can offer OpenAI's new commercial product, known as Frontier, without violating a longstanding agreement that requires all access to the start-up's models to be routed through Microsoft's Azure cloud platform. The arrangement is highly lucrative for Microsoft, with OpenAI's products helping drive Azure revenues to record highs. Amazon and OpenAI say they are building a system that works around the contract. Microsoft executives dispute this, saying the approach is not feasible and would violate the spirit, if not the letter, of their agreement, according to people familiar with the discussions. Ahead of Frontier's launch, the companies were still in talks to resolve the dispute without litigation, they added. "We know our contract," said a person familiar with Microsoft's position. "We will sue them if they breach it. If Amazon and OpenAI want to take a bet on the creativity of their contractual lawyers, I would back us, not them." The legal threat underscores a broader rift between Microsoft and OpenAI as the start-up pushes to loosen the constraints of its early contracts and diversify its cloud partnerships while its biggest backer increasingly views it as a competitor in enterprise AI services. OpenAI believes its plans with Amazon are compatible with its deal with Microsoft, according to a person familiar with its positions. The person added that Microsoft was unlikely to pursue legal action and invite further scrutiny while it is facing regulatory probes in the US, UK and EU into its alleged anti-competitive licensing practices with Azure. OpenAI's plans for a public listing as early as this year could be derailed if the dispute ends up in court. Even after closing a $110bn funding round last month, it needs to raise more cash to pay for the vast computing resources needed to train and run its large language models. The IPO is already complicated by a lawsuit filed by Elon Musk against chief executive Sam Altman, with whom he co-founded the start-up in 2015. The world's richest man is accusing Altman of abandoning its non-profit mission to enrich himself and other executives, with a trial scheduled to start in Oakland next month. "The last thing OpenAI needs is another court case right now," said the person familiar with Microsoft's position. OpenAI's Frontier deploys fleets of AI agents -- bots that can operate independently under human instructions -- within businesses. The platform is the centrepiece of the OpenAI-Amazon partnership announced last month, alongside a pledge to buy $138bn in cloud services from AWS. Microsoft had been OpenAI's exclusive cloud provider since investing $1bn in the start-up in 2019 but gave up that right when it signed off on its restructuring in October. However, it retained a clause covering application programming interfaces (APIs), the connections developers and businesses use to access OpenAI's models. The clause requires all API calls to be routed through Azure. Behind the scenes, the companies' lawyers clashed for weeks over the scope of Amazon's agreement and how it could be described, according to two people familiar with the matter. When the three groups released parallel statements describing the Frontier product, Microsoft asserted that nothing had changed from the October agreement and it remained the exclusive cloud provider for OpenAI APIs. The dispute hinges on the definition of "stateless" and "stateful" access to AI models. Large language models are "stateless" by default, retaining no information between user interactions. "Stateful" layers are added via applications to give them memory and context, which makes them more useful for businesses. Amazon and OpenAI are developing a system known as a "Stateful Runtime Environment" that runs in Amazon's Bedrock AI platform. The system would access company data stored on AWS, allowing OpenAI agents to remember prior work, operate across software tools and data sources, and access computing power. Those claims concerned Microsoft because its experts do not believe the technology exists to avoid running Frontier on Azure under the terms of its contract, the people said. To avoid provoking Microsoft, Amazon has given staff strict guidance on how to describe the SRE, according to an internal memo seen by the FT and first reported by Business Insider. AWS employees may tell customers that SRE is "powered by", "enabled by" or "integrates with" OpenAI, but are banned from saying that SRE "enables access" or "calls on" ChatGPT. Staff should also not suggest that OpenAI's most advanced frontier models are available on AWS. OpenAI maintains that its Amazon deal does not allow backdoor access to its stateless models, according to the person familiar with its position. The start-up has the right to make new products with third parties so long as they do not cross the "red line" of being primarily offered as an API. Amazon and OpenAI declined to comment. Microsoft said: "We are confident that OpenAI understands and respects the importance of living up to [its] legal obligation."

Microsoft considers legal action over $50 billion Amazon-OpenAI cloud deal: Report - The Economic Times

Last month, Amazon and OpenAI signed several agreements, including one that makes Amazon Web Services (AWS) the exclusive third-party cloud provider for Frontier, OpenAI's enterprise platform ⁠for ⁠building and running AI agents.Microsoft is considering legal action against its partner OpenAI and Amazon over a $50 billion deal that could violate its exclusive cloud agreement with the ChatGPT maker, the Financial Times reported on Wednesday. Last month, Amazon and OpenAI signed several agreements, including one that makes Amazon Web Services (AWS) the exclusive third-party cloud provider for Frontier, OpenAI's enterprise platform ⁠for ⁠building and running AI agents. The dispute centers on whether OpenAI can offer Frontier via AWS without violating the Microsoft partnership, which requires the start-up's models to be accessed through the Windows-OS maker's Azure cloud platform, the FT report said, citing sources. Reuters could not immediately verify the report. Microsoft, Amazon and OpenAI did not immediately respond to Reuters' requests for comment. FT said Microsoft executives believed the ⁠approach was not feasible and would violate the spirit, if not the letter, of their agreement, and added that the companies were in ⁠talks to resolve the dispute without litigation ahead of Frontier's launch. "We know our contract," a person familiar with Microsoft's position told the newspaper. "We will sue them if they breach it. If Amazon and OpenAI want to take a bet on the creativity of their contractual lawyers, I would back us, not them." Microsoft was one of OpenAI's earliest investors, infusing $1 billion in the firm in 2019 and $10 billion at the beginning of 2023. In September last year, the two signed a non-binding deal under new relationship terms, paving the way for OpenAI to sign deals with SoftBank, Nvidia ⁠and Amazon. In a joint statement last month, Microsoft and OpenAI said Microsoft maintained its "exclusive license and access to intellectual property across OpenAI models and products" and that Azure remained the exclusive cloud provider for OpenAI's models. While the statement sought to outline the limits to the work that Amazon and OpenAI could undertake together without involving Azure, it said Microsoft was "excited to see" what the two would build together and that Frontier would continue to be hosted on Azure.

Microsoft Considers Suing to Halt Amazon-OpenAI Cloud Deal | PYMNTS.com

As the Financial Times (FT) reported Wednesday (March 18), the issue hinges on whether Amazon Web Services (AWS) can offer OpenAI's new Frontier commercial product without breaking an agreement requiring all access to OpenAI's models to be run through Microsoft's Azure cloud platform. That agreement, the report added, is a lucrative one for Microsoft, which has seen Azure revenues reach record highs thanks in part to OpenAI's products. PYMNTS has contacted Microsoft for comment but has not yet gotten a reply. OpenAI and Amazon say they are working on a system that works around the contract, while Microsoft executives argue this approach would not work and would violate the company's agreement with OpenAI, sources familiar with the discussions told the FT. Prior to Frontier's debut last month, the companies were still holding talks to end the disagreement without resorting to legal action, the sources added. "We know our contract," said a person familiar with Microsoft's position. "We will sue them if they breach it. If Amazon and OpenAI want to take a bet on the creativity of their contractual lawyers, I would back us, not them." Meanwhile, a source familiar with OpenAI's positions says the company thinks its plans with Amazon and its deal with Microsoft are compatible. This source added that Microsoft was unlikely to pursue litigation and open itself to scrutiny while it is dealing with regulatory investigations tied to its cloud business. The news comes one day after a report that AWS and OpenAI had struck a deal that would help OpenAI sell its services to the federal government. AWS is already a major cloud provider to several government agencies, and has agreed to sell OpenAI products to other U.S. government customers, The Information reported, citing sources familiar with the matter. Also Tuesday (March 17), Amazon CEO Andy Jassy said the growth of artificial intelligence (AI) could push sales of AWS offerings to twice the level he once expected. Per a report from Reuters, the CEO said at an internal, all-hand meeting that he had expected for years that AWS could be an annual revenue run rate business of $300 billion in 10 years. Thanks to AI, Jassy now expects that it "has a chance to be at least double that."

Microsoft Eyes Legal Fight over Massive Amazon-OpenAI Cloud Deal Clash

Reportedly, Microsoft is considering legal action over an agreement between Amazon and OpenAI for a deal that could be worth as much as $50 billion for cloud computing. The reported deal has sparked tensions in an increasingly heated battle for dominance in artificial intelligence infrastructure between Big Tech firms. At the center of the dispute is Microsoft's relationship with OpenAI, through which Microsoft's Azure platform has been an essential cloud computing platform for OpenAI's models and enterprise solutions. The reported deal is for Amazon's web services to be used for OpenAI's upcoming enterprise AI platform. Microsoft is understood to be examining whether such an arrangement could violate contractual terms or undermine the spirit of its strategic alliance with the AI firm.