OpenAI and Microsoft Terminate AGI Clause and Exclusivity Provisions in Restructured Partnership

OpenAI and Microsoft announced Monday they have renegotiated their partnership agreement, eliminating Microsoft's exclusive access to OpenAI products and IP that was previously set to last until OpenAI achieved AGI. Under the new contract through 2032, Microsoft receives a non-exclusive license and enhanced revenue-sharing terms where Microsoft stops paying revenue share to OpenAI while OpenAI continues paying Microsoft through 2030 subject to a cap, building on Microsoft's $7.5 billion quarterly earnings from its 27 percent stake in OpenAI. The restructuring resolves legal tensions after OpenAI signed deals with Amazon in February for up to $50 billion in investment and in November for $38 billion in AWS cloud services, including exclusive rights to distribute OpenAI's Frontier agent tool on AWS Bedrock, which Microsoft had publicly contested and reportedly considered suing over. OpenAI can now distribute products through any cloud provider including AWS, though products will ship first on Azure unless Microsoft cannot support necessary capabilities, while OpenAI simultaneously rushes to build its own data centers with non-Microsoft partners.

Termination of Microsoft's Exclusive Rights and AGI Clause

• ▪OpenAI can now serve all its products to customers across any cloud provider under the new Microsoft agreement
• ▪OpenAI products will ship first on Azure unless Microsoft cannot and chooses not to support the necessary capabilities
• ▪Microsoft previously had exclusive access to all of OpenAI's products and IP until OpenAI produced AGI
• ▪The new Microsoft-OpenAI contract gives Microsoft a non-exclusive license to OpenAI IP for models and products through 2032
• ▪Microsoft and OpenAI are calling Microsoft OpenAI's primary cloud partner under the new agreement
• ▪Microsoft and OpenAI announced on Monday that they have renegotiated the deal binding the two companies

Resolution of the OpenAI-Amazon-Microsoft Legal Conflict

• ▪OpenAI's initial agreement with Microsoft prevented OpenAI from selling Frontier exclusively on AWS
• ▪Amazon CEO Andy Jassy stated that OpenAI's models would become available to customers on AWS Bedrock in the coming weeks
• ▪OpenAI agreed to co-develop a stateful runtime technology on AWS Bedrock as part of the Amazon investment deal
• ▪Microsoft retained exclusive rights to any OpenAI product accessed through an API under the previous agreement
• ▪In February, Amazon announced an investment of up to $50 billion in OpenAI, comprised of a $15 billion initial investment and another $35 billion in the coming months when certain conditions are met
• ▪OpenAI promised that AWS would have exclusive rights to serve up OpenAI's new agent-making tool Frontier
• ▪The Financial Times reported that Microsoft contemplated legal action to enforce its contract terms with OpenAI

Financial Terms and Revenue Sharing Arrangements

• ▪Microsoft reported that it made $7.5 billion in a single quarter from its investment in OpenAI
• ▪In November, OpenAI and Amazon signed a multi-year agreement in which OpenAI contracted for $38 billion worth of AWS cloud
• ▪Microsoft owns about 27 percent of the OpenAI for-profit entity as of October
• ▪In October, OpenAI agreed to buy an additional $250 billion worth of Microsoft's cloud
• ▪OpenAI will continue to pay revenue share to Microsoft through 2030 under the new agreement, subject to a cap

Strategic Positioning and Multi-Cloud Competition

• ▪The October Microsoft-OpenAI agreement gave OpenAI the ability to run non-API-accessed products on other clouds
• ▪In October, Microsoft and OpenAI announced a new agreement to help OpenAI fend off the lawsuit from Elon Musk about its corporate structure

Perspective of Amazon Web Services

• ▪Amazon CEO Andy Jassy stated that OpenAI's models would become available to customers on AWS Bedrock in the coming weeks
• ▪OpenAI agreed to co-develop a stateful runtime technology on AWS Bedrock as part of the Amazon investment deal
• ▪OpenAI promised that AWS would have exclusive rights to serve up OpenAI's new agent-making tool Frontier