Microsoft Strikes $1.1 Billion Deal To Purchase 800 AOL Patents

Microsoft has announced that it will pay out $1.1 billion (£700m) to acquire more than 800 AOL patents related to advertising, search, mobile and other technologies.

The deal stipulates that AOL will retain a license to the sold portfolio with Microsoft gaining a license to the former’s remaining 300-plus patents.

Patent pay-out

Citing sources close to the matter, Reuters reports that the sale includes rights to some of AOL’s current and former businesses, including Netscape, MapQuest, CompuServe and Advertising.com.

AOL’s shares rose by more than 40 percent in the wake of the patent sale announcement, with the company’s directors promising to deliver a “significant portion” of the proceeds to shareholders.

“The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value,” said AOL’s CEO Tim Armstrong.

“This is a valuable portfolio that we have been following for years and analyzing in detail for several months,” said Brad Smith, Microsoft’s general counsel and executive vice president of legal and corporate affairs. “AOL ran a competitive auction and by participating, Microsoft was able to achieve our two primary goals: obtaining a durable license to the full AOL portfolio and ownership of certain patents that complement our existing portfolio.”

The auction apparently began last autumn, partly influenced by the Rockstar Consortium’s multi-billion dollar purchase of Nortel Networks’ 6000 patents. A Reuters source suggested that Google, Facebook, Amazon and eBay participated in the auction alongside Microsoft. The latter was confirmed as the winner on 5 April in what will be a boon for the company’s portfolio amid ongoing global patent litigation.

Florian Mueller of FOSS Patents notes that, among other areas, the AOL deal may bolster Microsoft’s social networking capabilities.

“Microsoft’s Windows Live service offerings have a lot of social networking functionality, and they’re becoming more social with every new version,” he said. “AOL was the world’s first social network, so it likely has significant patents in that area. AOL and the companies it acquired have also innovated in other fields that are relevant to Microsoft.

“For Facebook it must be comfortable to know that one of its strategic allies, as opposed to a rival or a patent troll, bought these patents.”

The patent deal will undergo regulatory screening and is expected to be completed by the end of this year.

Are you a patent expert? Find out with our quiz!