A federal judge has dismissed a lawsuit against AOL, brought forward by shareholders that accused the company and some of its executives of committing fraud.
Shareholders accused the tech giant of fraud for repurchasing 14.8 million shares in 2011 without disclosing a deal which allowed Microsoft to buy a portfolio of patents worth $1 billion several months later, according to Reuters.
Microsoft paid AOL $1.06 for approximately 800 patents and related applications in 2012. AOL still holds over 300 patents and patent applications related to advertising, content generation, content management, multimedia and security, and retains licenses to use the patents sold to Microsoft. At the time, AOL's CEO Tim Armstrong said:
"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."
The plaintiffs said that knowledge of the patent sale, and leaving investors in the dark, allowed the AOL CEO and former CFO Arthur Minson to buy back 14.8 million shares at a discount rate. As the deal was not disclosed, investors claim that they suffered "significant losses" when selling their shares ahead of the sale -- in which stock surged 43 percent in 24 hours.
According to the publication, U.S. District Judge Denise Cote wrote in her opinion that "the complaint's conspiracy theory is mere speculation," and no adequate examples of factual omissions conducted by AOL executives prior to the sale were brought to the table.
The judge also commented that it was "well known" that AOL's portfolio had the potential to be "extremely valuable" -- AOL investor Starboard Value publicly stating that it could be worth as much as $1 billion. Combined with the market trend which saw other firms sell of their patent portfolios, and it is no surprise that the Microsoft-AOL deal went ahead.
Cote writes that other accusations within the complaint "simply provide no basis for an assertion that AOL and Microsoft reached a secret deal for the sale of the patents months before the auction was conducted."