Microsoft, Facebook strike deal over AOL patent portfolio

Microsoft gives Facebook the right to purchase -- for $550 million cash -- a portion of the patent portfolio it recently agreed to acquire from AOL.
Written by Andrew Nusca, Contributor

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?

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