Microsoft Buys and Licenses AOL Patents in $1 Billion Deal

AOL announced Monday that it is selling more than 800 patents in a deal worth $1.06bn (£668m).

The global gold rush in technology patents was spotted on Monday when Microsoft revealed its plans to pay more than $1 billion for 800 patents held by AOL. Photo: Heylee/Flickr

AOL announced it sold to Microsoft about 800 patents related to advertising, search, e-commerce and mobile to Redmond, Wash-based company, surprising investors with the size of the deal and sending AOL shares up more than 40 percent.

As Reuters reports, the purchase includes technology rights from AOL’s current and former businesses, ranging from Netscape, ICQ and MapQuest to CompuServe, and others.

The sale process, which AOL Chief Executive Tim Armstrong described as a “full-blown dynamic auction,” started last fall after board approval. But the final choice was made on April, 5.

“The agreement with Microsoft represents the culmination of a robust auction process for our patent portfolio,” said Armstrong. Its shares rose more than 40% on the news.

Armstrong said he called to Microsoft Chief Executive Steve Ballmer to alert him of the company’s decision.

Microsoft’s executive vice-president of legal affairs, Brad Smith, said: “This is a valuable portfolio that we have been following for years and analysing in detail for several months.”

According to AOL Chief Executive, the auction included e-commerce companies Amazon and eBay, both of which have been largely absent from the recent patent wars, as well as Google and Facebook, according to the source.

Spokesmen for Google, Facebook, eBay and Amazon were not available for comment. “Microsoft is increasing its arsenal, even if it is expensive,” said James E. Bessen, a patent expert and lecturer at the Boston University School of Law.

Patents have become quite popular in recent years. They give the holder the exclusive right to use certain technologies or business processes in the U.S. Companies such as Microsoft, Apple, Facebook, Google and others to defend their businesses or to attack rivals, writes CBS News.

“Patents have become legal weapons. They’re not representing ideas anymore,” says James Bessen, a lecturer at Boston University and the director of a nonprofit that studies patent issues.

Prices for patents are rising as the big companies load up. Google last August agreed to pay $12.5 billion for Motorola Mobility, who provided a trove of 17,000 patents. That portfolio, analysts estimate, could represent more than half the value of the deal, or more than $400,000 a patent.

“It’s a precedent because of the scale of these things,” said of Microsoft and AOL deal Jim Bessen, a fellow at the Berkman Center for Internet and Society at Harvard University. “A billion dollars for 800 patents? That’s just astounding.”

Last year, Apple and Microsoft joined four other companies to pay $4.5 billion for the 6,000 patents held by the bankrupt Canadian telecommunications maker Nortel Networks. That worked out to $750,000 a patent, or nearly four times the average for computer, software and telecommunications patents a few years earlier, experts say.

As The New York Times claims, last month, Facebook revealed it had bought  750 patents from I.B.M. for an undisclosed sum, shortly after the social networking giant faced a patent lawsuit by Yahoo.

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