Under the deal, Microsoft will acquire about 800 patents from AOL, most of which relate to Internet technologies and methods for Web browsing, sending e-mail, getting online, and messaging. AOL will retain about 300 patents, which Microsoft also gains the right to use, under non-exclusive licenses.
The patents were sold at auction, and "some of the largest players in the world" participated, said AOL chairman and CEO Tim Armstrong, during an interview on CNBC. Armstrong did not identify the other companies involved. Armstrong said the deal was "a grand slam" for AOL, which has been under pressure from investors to monetize its intellectual property assets.
In a statement, Microsoft general counsel Brad Smith said the deal gives Redmond "a valuable portfolio that we have been following for years and analyzing in detail for several months." Smith said that Microsoft "was able to achieve our two primary goals: obtaining a durable license to the full AOL portfolio and ownership of certain patents that complement our existing portfolio."
Beyond Smith's statement, Microsoft was mum about the details, and its motivations. Experts suggested the company felt the need to bulk up its portfolio of Internet-related patents in case Google or another competitor mulls a patent fight. "They likely acquired these patents with a defensive strategy in mind," said Maulin Shah, managing director at patent research firm Envision IP. "This will give Microsoft an arsenal of patents going back to the mid-nineties covering search and related technologies."
In Google's case, any court action against Microsoft would be more of a counter-strike. Microsoft, although not taking on its rival directly, has sued Google Android device makers Barnes & Noble and Motorola for patent infringement.
Envision IP recently completed a study of AOL's patent portfolio. The firm found that the company's holdings include 140 patents that relate to online communications, 81 that relate to Web browsers, and 77 that govern search engine technologies. Because many of the patents date from the early to mid-90s, Shah speculated that AOL acquired much of the trove it's selling to Microsoft through its $4.2 billion buyout of Internet pioneer Netscape in 1998. "I'm guessing that many of these patents are the original Netscape patents," said Shah.
Once mostly the domain of entrepreneurial inventors, patents are increasingly being acquired and wielded strategically by international tech giants looking to deter or preempt lawsuits from rivals.
After losing out to Microsoft and Apple at an auction where defunct telecom vendor Nortel's patents sold for $4.5 billion, Google last year acquired Motorola Mobility for $12.5 billion. It's widely believed that Google's motivation was to gain access to Motorola's 17,000 patents. Last month, Facebook acquired 750 patents from IBM in a move that was seen as a defensive measure against Yahoo.
Microsoft and AOL said they expect their deal to close by the end of 2012, subject to antitrust and other approvals. See the future of business technology at Interop Las Vegas, May 6-10. It's the best place to learn how cloud computing, mobile, video, virtualization, and other key technologies work together to drive business. Register today with priority code CPQCNL07 to get a free Expo Pass or to save 25% on Flex and Conference passes..