In a thinly-veiled attempt to cover its backside before going public, Facebook on Monday agreed to purchase around 650 patents that Microsoft recently purchased from AOL.
The $550 million purchase price enables Microsoft to recoup around half of the $1.056 billion that it spent earlier in the month to acquire 925 patents from AOL, along with right to license the company's remaining trove of patents that were not for sale.
It's clear now that a deal with Facebook was in the works before Microsoft completed the transaction with AOL. Microsoft general counsel Brad Smith told All Things Digital that the company had no real interest in owning the entire portfolio of AOL patents when it made the initial deal.
However, the AOL auction required interested parties to bid on the complete family of patents. Microsoft did so knowing it would later unload them to Facebook, which reportedly had showed interest inking a deal with AOL earlier in April.
“That was our plan from the day we went into the auction,” Smith told All Things Digital. “We never felt it was necessary or even important for us to own all the patents.”
On the surface, the deals make sense for all three parties. AOL receives a much-needed influx of cash while retaining around 300 patents related to its core businesses, including advertising, search and content generation/management.
Microsoft, meanwhile, receives a heavy discount on its original transaction along with full ownership of AOL's highly coveted social networking patents.
For Facebook, the deal will help act as a moat, protecting the social network from a host of predators that are sure to target the soon-to-be-public company with patent infringement litigation. The deal will comes as bad news for Yahoo, which sued Facebook last month for allegedly infringing on more than a dozen patents.
Yahoo has accused Facebook of borrowing its technology to create several staples of its service, including its News Feed, the primary way of viewing friends’ activity and other privacy technologies. Yahoo even went on to accuse Facebook of stealing the format used to display its ads, TMC reported. Facebook denied the allegations and later counter-sued Yahoo.
The new collection of patents acquired from Microsoft should help Facebook better arm itself in the ever-escalating patent wars in the Web and mobile spaces.
“Today’s agreement with Microsoft represents an important acquisition for Facebook,” Ted Ullyot, general counsel, Facebook, noted 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.”
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