This is a very clever move by Microsoft. In essence they are painting a giant bullseye on their back to any lawsuits that may arise. The idea being that they have the resources to challenge them (they aren't wrong).
The way AI is going I'm sure we'll see some landmark cases very soon. It is very much in Microsoft's interest to grow this market as fast as possible and be at the center of it. This removes one of the key impediments to adopting generated code for smaller orgs: "Will I get sued if this product generates code that is copyrighted?".
prediction: use cloud deployments to fork critical GPL parts, restrict security updates that are required to their fork and implementation; control the rabble for a few years, issue press releases, and stall while they entrench it.
You wouldn't be suing Microsoft though. Microsoft would come to your aid if you are being sued for copyright infringement. That's a different situation altogether.
So this is an indemnification for damages, not a protection against being sued.
In the most extreme case depending on how case law shakes out, the use of the models by a third party and distribution of the results will incur statutory damages for each work the model was trained on. This could bankrupt Microsoft for offering indemnification to even a tiny company, but as a response Microsoft could instead breach contract and not provide the indemnification. After the company goes bankrupt shareholders could only sue them for for the damages of not indemnifying you, limiting the liability to the size of the company that was sued into oblivion and not expanding out to unlimited liability for MS.
They probably have wording to prevent a mandatory injunction where you would compel the indemnification before the bankruptcy.
This makes sense. When I read the article I couldn't help but think of the legal fiasco between the IRS and the Church of Scientology.
I wonder if this is part of a broader strategy to get people comfortable with copilot in a similar way to how Uber got people comfortable to their product even though they were operating in a legal grey area. At a certain point the public becomes accustomed to it so the lawmakers just cave in to the demand.
Or Microsoft just sees this as the less bad option. An acceptable tax, handing out some money extraction to white collar folks so the pressure on gov to cripple them doesn't come as fast.
The way AI is going I'm sure we'll see some landmark cases very soon. It is very much in Microsoft's interest to grow this market as fast as possible and be at the center of it. This removes one of the key impediments to adopting generated code for smaller orgs: "Will I get sued if this product generates code that is copyrighted?".
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