Hi Jonathan,
Rest assured that we have neither desire nor intention to claim your intellectual property. The license you grant in the TOS is purely to allow us to legitimately provide the App Engine service.
Note, of course, that I am not a lawyer, this is not legal advice, and I can't speak to specific legal details. If you're concerned about this, I recommend consulting a lawyer and asking for their interpretation of the Terms of Service to be sure.
-Nick Johnson
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Nick Johnson, App Engine Developer Programs Engineer
Google Ireland Ltd. :: Registered in Dublin, Ireland, Registration Number: 368047