Los Angeles -- Barely two weeks after Microsoft coughing out more than US$1 billion to AOL for hundreds of patents and patent applications, the patent play took a novel twist Monday when social media humongous Facebook continuing its latest spending spree agreed to pay Microsoft about $550 million for some 650 former AOL patents and patent applications, the social networking company's latest attempt to stuff up its intellectual property in the wake of a lawsuit filed by Yahoo.
This latest move comes just a couple of weeks after Facebook agreed to buy mobile photo-sharing app Instagram for about $1 billion. According to Facebook, this move indicates another step in its process of building an IP portfolio to protect its interests.
The deal, shortly before Facebook is anticipating to have the largest initial public offering in Silicon Valley history, will pay Microsoft $550 million in cash for ownership of approximately 650 AOL patents and patent applications, plus a license to the AOL patents and applications that Microsoft is holding. That is almost half the $1.1 billion Microsoft forked out for the patents.
By the way, each party in this latest transaction will retain licenses to the intellectual property (IP) the other will hold when the deal is completed, and figuratively, this deal will give the social network 650 patents and patent applications, as well as a license to another 275 patents and applications owned by Microsoft.
“Today's agreement with Microsoft represents an important acquisition for Facebook,” said Ted Ullyot, Facebook's general counsel, in a statement. “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 two companies already enjoy a very cozy relationship, with Microsoft owning a portion of Facebook, so it makes sense for Microsoft to share its newly acquired patents and their cost. As for Facebook, this is all part of its effort to stuff up its patent arsenal as it prepares to go public next month and seeks to stave off potential litigation. The social media outfit is 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.
Brad Smith, executive vice president and general counsel for Microsoft, added that “Today's agreement with Facebook allows us to recoup over half of our costs while achieving our goals from the AOL auction. 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.”
The deal solidifies a long-standing alliance between Facebook and Microsoft. Besides, the move also safeguards Facebook with added protection should other companies' patent lawyers come knocking.