Microsoft Contemplates Legal Action Against OpenAI and Amazon Over $50 Billion Deal

Microsoft weighs legal action as OpenAI and Amazon’s $50 billion partnership threatens Azure’s cloud exclusivity.

Microsoft is considering initiating legal action over a $50 billion deal between its partner OpenAI and Amazon that it claims runs contrary to its exclusive agreement with OpenAI, popularly known as the maker of ChatGPT. This follows the signing of several agreements by Amazon and OpenAI last month, including one that designates Amazon Web Services (AWS) as the exclusive third-party cloud provider for OpenAI’s Frontier enterprise platform. This platform is designed for building and running AI agents.

At the heart of the dispute is Microsoft’s contention that OpenAI's offering of Frontier via AWS violates its partnership with OpenAI. The agreement between Microsoft and OpenAI mandates accessing the latter’s models through the former’s Azure cloud platform. Microsoft’s executives cited the violation of spirit, if not the letter, by Amazon and OpenAI’s announced approach. However, the company is extending an olive branch to both Amazon and OpenAI by entering into talks for resolving the matter amicably through a mutually agreed solution. A source familiar with Microsoft’s position told the Financial Times, “We know our contract. 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."

Significantly, Microsoft was one of OpenAI’s earliest investors by infusing $1 billion in the firm in 2019 and $10 billion at the start of 2023. The two had signed a non-binding deal under new relationship terms last September, enabling OpenAI to sign deals with SoftBank, Nvidia, and Amazon. Moreover, a joint statement in February highlighted OpenAI and Microsoft maintaining their “exclusive license and access to intellectual property across OpenAI models and products” and Azure remaining the exclusive cloud provider for OpenAI’s models. Thus, the CIO Bulletin views the ongoing dispute as an interesting case study of corporate agreements and the liabilities arising out of them.