Microsoft And Facebook Strike $550 Million Deal Over AOL Patents

Microsoft and Facebook announced a definitive agreement on Monday, under which Microsoft will assign to Facebook the right to purchase a portion of the patent portfolio it recently agreed to acquire from AOL Inc.

Facebook has agreed to purchase this portion for $550 million in cash.

In the original AOL auction, Microsoft secured the ability to own or assign approximately 925 US patents and patent applications plus a license to AOL's remaining patent portfolio, containing around 300 additional patents that were not for sale.

As a result of Monday's agreement, Facebook will acquire the ownership of approximately 650 AOL patents and patent applications, plus a license to the AOL patents and applications that Microsoft will purchase and own.

Upon closing of this transaction with Facebook, Microsoft will retain ownership of approximately 275 AOL patents and applications; a license to approximately 650 AOL patents and applications that will now be owned by Facebook and a license to approximately 300 patents that AOL did not sell in its auction.

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.

Ted Ullyot, general counsel, Facebook, said that the patent agreement is a significant step in the company's ongoing process of building an intellectual property portfolio to protect its interests over the long term.

According to Gartner analyst Brian Blau, the agreement is a positive move for Facebook since it prepares for its upcoming IPO. By enhancing its patent portfolio, the popular social network can not only strengthen its legal position against Yahoo and other future plaintiffs, but also make itself more attractive to investors it needs to attract as a soon-to-be publicly traded company, PC Advisor reported.

What Facebook did was boost its defenses for all of those questions, Blau told PC Advisor in a phone interview.