Microsoft, Facebook strike deal over AOL patent portfolio

Microsoft, Facebook strike deal over AOL patent portfolio

Summary: Microsoft gives Facebook the right to purchase -- for $550 million cash -- a portion of the patent portfolio it recently agreed to acquire from AOL.

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Microsoft and Facebook announced moments ago that the former will give the latter the right to purchase -- for $550 million cash -- a portion of the patent portfolio Microsoft recently agreed to acquire from AOL.

Microsoft's original deal with AOL included the acquisition of about 925 U.S. patents and applications, plus a license to AOL's remaining 300 or so patents. This new deal gives Facebook the chance to acquire 650 patents and applications that originally came from AOL, plus a license to the rest of the AOL patents -- about 275 -- Microsoft will soon own.

(It will not, however, gain access to the patents AOL still retains and to which Microsoft has license.)

Bloomberg first broke the news.

"Today's agreement with Facebook enables us to recoup over half of our costs while achieving our goals from the AOL auction," Microsoft general counsel Brad Smith said. "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."

It's a clever move for Microsoft, which gets the financial benefit of playing the middleman between the old and new tech guards.

It's also an interesting opportunity for Facebook, which has demonstrated in recent months a tremendous hunger to block out competition, through acquisition or intellectual property. In many ways, Facebook is using its deep pockets and largesse to bulk up defenses in its growing corner of the technology industry -- despite the occasional distraction. (Ahem, Yahoo.)

This appetite from Facebook is hardly new. Back in 2010, my CNET colleague Caroline McCarthy detailed how Facebook acquired Friendster -- via MOL Global -- for the same reason. It wasn't a play for more customers; rather, it was a bid for IP it deemed valuable for future endeavors. It acquired MailRank and Friend.ly in 2011 to bring chatter-focusing and question-answering tech to its platform. Snaptu and Strobe were absorbed in 2011 for mobile firepower. And its more recent acquisition of geolocation-based social app Gowalla was for talent to hedge against a growing Foursquare. Et cetera.

As Facebook continues to grow, it will throw its weight around more frequently. The questions: who will be left standing? And who is Facebook really competing against besides Google?

Topics: Social Enterprise, Legal, Microsoft

Andrew Nusca

About Andrew Nusca

Andrew Nusca is a former writer-editor for ZDNet and contributor to CNET. During his tenure, he was the editor of SmartPlanet, ZDNet's sister site about innovation.

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5 comments
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  • so after the patent sale to Facebook

    does Microsoft hold onto some rights to the patents after the sale to facebook? I mean, would Microsoft have to license those sold patents from facebook if they wanted to use them after the sale?
    blazing_smiley_face
    • Yes.

      Yes. Microsoft will retain a license to the approximately 650 AOL patents and applications that will now be owned by Facebook.
      andrew.nusca
  • must be investigated

    for anti competitive effects against google & other social media players.
    The Linux Geek
    • You should be investgated

      by a group of psychologist
      William Farrel
  • So Microsoft is positioning Facebook to fight against Google

    And to a lesser extent Yahoo. I've heard that Mosaid is going to start suing Apple and Google, seeking Billions in Patent royalties. It doesn't matter if they previously had deals with Nokia, those deals are being rescinded.
    Jumpin Jack Flash