Facebook, Microsoft Ink $550M Patent Deal

Facebook has agreed to acquire up to 650 or so of the patents that Microsoft obtained from AOL in an auction earlier this month for nearly $1.1 billion.

Facebook announced a deal with Microsoft where, for $550 million, the social networking giant will acquire a portion of the patents Microsoft recently acquired from AOL.

Microsoft and Facebook announced a definitive agreement under which Microsoft will assign to Facebook the right to purchase a portion of the patent portfolio it recently agreed to acquire from AOL. Facebook has agreed to purchase this portion, which includes about 650 patents, for $550 million in cash.

In the initial AOL auction, Microsoft earlier this month secured the ability to own or assign approximately 925 U.S. patents and patent applications plus a license to AOL€™s remaining patent portfolio, which contains approximately 300 additional patents that were not for sale. Facebook also bid on the patents in the initial auction, but lost out to Microsoft.

However, on April 23, Facebook will obtain ownership of approximately 650 AOL patents and patent applications, plus a license to the AOL patents and applications that Microsoft will purchase and own.

Upon closing the transaction with Facebook, Microsoft will retain ownership of approximately 275 AOL patents and applications; a license to the approximately 650 AOL patents and applications that will now be owned by Facebook; and a license to approximately 300 patents that AOL did not sell in its auction.

Microsoft paid AOL around $1.1 billion for its patents and now turns around and sells the ones the company does not need to Facebook for about half of what the software giant paid for the batch.

€œToday€™s agreement with Facebook enables us to recoup over half of our costs while achieving our goals from the AOL auction,€ said Brad Smith, executive vice president and general counsel at Microsoft, in a statement. €œAs 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.€

€œToday€™s agreement with Microsoft represents an important acquisition for Facebook,€ Ted Ullyot, general counsel at Facebook, said in a statement. €œThis is another significant step in our ongoing process of building an intellectual property portfolio to protect Facebook€™s interests over the long term.€

Facebook has been criticized for having very few patents for a company of its size and presence, particularly in light of the litigious tech business. Yahoo filed suit against Facebook claiming patent infringement, and Facebook fired right back at Yahoo with a countersuit using some patents the company had acquired as well as some based on its own technology. However, the deal with Microsoft bolsters the Facebook arsenal and gives the company a bit of swagger on the IP front.