Microsoft Sells AOL Patents to Facebook for $550 Million

By Joseph Mandour on April 25, 2012

Patent Law FirmsSan Diego – Just a few weeks after acquiring a large number of patents from a floundering America Online (AOL), Microsoft has announced that it will be transferring off most of those patents to Facebook.

Of the 925 patents Microsoft purchased from AOL for a reported $1.06 billion cash deal, it will be selling off or licensing 650 of those patents to social networking giant Facebook for $550 million in cash. Although through the purchase Facebook will have rights to use many of the patents it didn’t purchase outright, Microsoft will retain the rights to many of the patents for offensive or defensive purposes.

Many companies look to purchase patents from flailing companies as a way to bolster their own patent portfolios for development purposes as well as for ammunition in patent infringement situations. This practice has become increasingly common in the high tech industry especially with many of these companies taking advantage of the high-revenue licensing deals these patents bring as well.

Shortly before the company is scheduled to go public, Facebook has been on somewhat of a spending spree, having reportedly purchased 750 patents from IBM. According to the company’s S-1 filing, as of the end of last year, Facebook was the owner of 56 USPTO issued patents, 503 U.S. patent applications, and 149 patent applications filed in foreign countries, relating to social networking, web technologies and infrastructure, and related technologies.

The acquisition of these patents has helped Facebook tremendously in last month’s patent attack by Yahoo. Facebook has managed to protect itself by counter-suing with a patent for every patent that Yahoo claims it has infringed. Rather than give up valuable shares just before its IPO, Facebook has refused to lay down and pay up like Google did in 2004. This would have indicated weakness and made investors nervous just before it goes public.

“Today’s agreement with Microsoft represents a major acquisition for Facebook,” stated a spokesperson for Facebook. “This is another significant step in our ongoing process of building an intellectual property portfolio to protect Facebook’s interests over the long term.”

Under the agreement, Microsoft will keep a license to every one of the patents it originally purchased from AOL: the 650 it sold to Facebook, ownership of the 275 patents it retained, and additionally the 350 patents AOL never sold. The Facebook transaction will allow Microsoft to recoup some of its costs from the AOL patent purchase, and also allow it to retain rights to the technology.

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Posted in: Patent Registration