Facebook buys AOL patents from Microsoft for $550M

The social network, closing in on what should be a mammoth IPO, is fattening up its patent war chest "to protect Facebook's interests over the long term."

Paul Sloan Former Editor
Paul Sloan is editor in chief of CNET News. Before joining CNET, he had been a San Francisco-based correspondent for Fortune magazine, an editor at large for Business 2.0 magazine, and a senior producer for CNN. When his fingers aren't on a keyboard, they're usually on a guitar. Email him here.
Paul Sloan
2 min read

Facebook is paying Microsoft $550 million in cash for a chunk of the patent portfolio that Microsoft recently acquired from AOL.

This is all part of Facebook's effort to fatten up its patent war chest as it prepares to go public next month and seeks to stave off potential litigation. It's currently embroiled in a big patent fight with Yahoo, and last month Facebook struck a deal with IBM to purchase some 750 of its patents, which cover "software and networking" technologies.

Earlier this month, Microsoft spent more than $1 billion to buy roughly 800 patents from AOL, and it's now selling the majority of them to Facebook. Facebook is buying about 650 AOL patents and patent applications, and also will gain a license to the 275 other patents and patent applications that Microsoft will continue to own.

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

In an interview with AllThingsD, Smith said, "We never felt it was necessary or even important for us to own all the patents."

Ted Ullyot, general counsel for Facebook, said, "This is another significant step in our ongoing process of building an intellectual property portfolio to protect Facebook's interests over the long term."

The deal solidifies a long-standing alliance between Facebook and Microsoft. In October 2007, Microsoft paid $240 million in return for approximately 1.6 percent of Facebook. As part of that deal, which broadened an earlier marketing arrangement, Microsoft would help sell Internet ads for Facebook. At the time, the Facebook arrangement was seen as a way for Microsoft to counter Google's increasing clout in the online advertising market.

The move also affords Facebook more protection should other companies' patent lawyers come knocking. In March, Yahoo sued Facebook, claiming that the social networking company infringed on 10 of its patents. Facebook, which denies the allegations, has since countersued.

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