Thanks to Facebook, Microsoft will recoup much of its investment in AOL’s patent portfolio, while retaining the right to leverage the patents moving forward.
In a joint release, Microsoft and Facebook announced that they have entered into a half-billion dollar deal over Microsoft’s recently acquired AOL patents. According to the announcement, Facebook has agreed to acquire a large portion of the patent portfolio in exchange for $550 million in cash.
“Today’s agreement with Facebook enables us to recoup over half of our costs while achieving our goals from the AOL auction,” said Brad Smith, executive vice president and general counsel, Microsoft. “As we said earlier this month, we had submitted the winning AOL bid in order to obtain a durable license to the full AOL portfolio and ownership of certain patents that complement our existing portfolio.”
This statement by Smith explains much of Microsoft’s motivation for the deal. Under the terms agreed upon by Facebook, Microsoft will retain ownership of approximately 275 of the 925 AOL patents and patent applications it purchased, in addition to a license to the approximately 650 AOL patents and applications that will eventually be owned by Facebook, and a license to approximately 300 patents that AOL did not sell in its auction. The deal is a sweet one for Microsoft as the company retains the right to leverage technologies protected by the patents, while recovering more than half of Microsoft’s $1B investment in the original purchase.
Facebook’s motivation is somewhat different. “Today’s agreement with Microsoft represents an important acquisition for Facebook,” said Ted Ullyot, general counsel, 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.”
It seems that, in preparation for the company’s eventual IPO and to help improve its position against rivals, Facebook is bolstering its patent portfolio in an effort to better protect itself and potential investors. Facebook has also recently used portions of its existing patent portfolio to countersue Yahoo!. And although we’re speculating here, purchasing these patents from Microsoft will probably give Facebook even more ammunition in the fight.
Microsoft and Facebook have been long-time bedfellows since Microsoft purchased a 1.6% share in Facebook for $240 million back in 2007. This new patent agreement seems to benefit both companies moving forward, which is good news for both sides.
