* Microsoft paid slightly more than $1 bln for patents
* Facebook to acquire 650 AOL patents from deal
By Alexei Oreskovic and Diane Bartz
SAN FRANCISCO/WASHINGTON April 23 Facebook will
pay Microsoft Corp $550 million for hundreds of patents
that originated with AOL, beefing up its intellectual
The deal gives social network Facebook 650 patents and
patent applications and license to another 275 patents and
applications. It comes shortly before Facebook is expected to
have the largest initial public offering in Silicon Valley
Patents have become a top priority for technology companies
as many of them, including Google Inc and Apple Inc
, become embroiled in patent-related lawsuits.
The patents, which Microsoft bought this year from AOL,
cover a broad spectrum of technology, including mobile services,
cell phone handsets, advertising and e-commerce, a source
familiar with the situation said.
Microsoft trumped Amazon, eBay and other tech companies this
month with its more than $1 billion purchase of most of AOL's
patent trove. Valuing patents is a complex process, and it was
not immediately clear whether Microsoft profited from the deal
Brad Smith, Microsoft's general counsel, said in a statement
on Monday that the Facebook deal allows it "to recoup over half
of our costs while achieving our goals from the AOL auction."
Facebook was also a participant in the AOL auction, a source
said at the time.
The auction included technology rights from AOL's current
and former businesses, ranging from Web browser Netscape and
instant messaging service ICQ to MapQuest and early online
service CompuServe, the source said on condition of anonymity
because the information was not public.
ALL OR NOTHING
Microsoft bought the AOL patent portfolio knowing that it
was an all-or-nothing deal and always planned to sell a large
number of them while retaining licenses to them, a source close
to the Facebook deal said. Microsoft will retain a license to
the patents and applications it is selling to Facebook under the
terms of the deal.
The purchase marks Facebook's second recent move to bolster
its patent portfolio, which consisted of 56 issued patents and
503 applications as of December 31, according to a filing with
the U.S. Securities and Exchange Commission.
In March, it acquired 750 patents from International
Business Machines Corp.
Facebook's deal with Microsoft comes as the world's No.1
social networking company prepares for an initial public
offering that could value it at up to $100 billion and as it
battles Yahoo Inc in court.
Yahoo sued Facebook earlier this year, claiming that
Facebook had infringed 10 Yahoo patents, including several
covering online advertising technology. Facebook countersued
Yahoo in April, accusing Yahoo of infringing 10 of Facebook's
"Nothing about today's action changes the fact that Facebook
continues to infringe our patents ... We see today's
announcement as a validation of our case against Facebook," a
Yahoo spokeswoman said in an emailed statement.
The deal for AOL's patents, which is subject to regulatory
clearance, would help "protect Facebook's interests over the
long term," the company said.
Technology companies have sparked a frenzy for patents in
recent years, bidding up prices in a defensive move to keep
competitors at bay.
On July 1, 2011, Apple, Microsoft, Research in Motion Ltd
and three other leading technology companies outbid
Google to buy wireless patents from bankrupt Nortel Networks
Corp for $4.5 billion.
Google quickly responded by successfully announcing plans to
acquire Motorola Mobility Holdings, which owns 17,000 patents
and 7,500 patent applications, for $12.5 billion.
The agreement between Facebook and Microsoft is the latest
occasion that the world's No.1 online social networking service
and the world's largest software company have teamed up.
Microsoft invested $240 million in Facebook in 2007 for what
was then a 1.6 percent stake.
The two companies have forged various business
collaborations over the years. Facebook features search results
from Microsoft's Bing search engine in its social networking
service as well as video chat technology provided by Skype,
which Microsoft acquired last year.
Netflix Chief Executive Reed Hastings serves on the board of
directors of Facebook and Microsoft.
Microsoft also has ties to Yahoo through a 10-year search
partnership they struck in 2009.