Microsoft Pays $1.1 Billion for 800 AOL Patents

Non-exclusive deal includes licensing 300 additional patents and patent applications.

Microsoft Corp. last week said that it will pay $1.056 billion for 800 AOL Inc. patents and a non-exclusive option to license another 300 of the company’s patent and patent applications.

Under terms of the agreement, which is expected to close by the end of this year, AOL will retain 300 patents related to advertising, search, content generation/management, social networking, mapping, multimedia/streaming, and security, for which Microsoft will be granted a non-exclusive license.

AOL, in turn, will receive a license to the patents sold to Microsoft, officials said.

The companies did not reveal which patents are included in the agreement but inasmuch as patents now have become weapons in legal battles over wide range of technology such as smartphones and tablets, Microsoft’s keen interest in AOL’s patent portfolio is easy to understand.

Last year, for example, Google Inc. plunked down some $12. 5 billion for Motorola Mobility, some of the value of which resides in the manufacturer’s patent collection and about which Microsoft openly has expressed concern.

Microsoft said that it sought ownership of certain AOL patents and the opportunity to license the full portfolio.

"This is a valuable portfolio that we have been following for years and analyzing in detail for several months," said Brad Smith, Microsoft general counsel and executive vice president, Legal and Corporate Affairs.

"AOL ran a competitive auction and by participating, 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," he said.

AOL said that it will hand over much of the sale’s proceeds to shareholders although it has yet to determine the best way to do so.

"The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value," said Tim Armstrong, AOL chairman and chief executive.

Should the deal fall through, Microsoft is on the hook to AOL for a $211.2 million termination fee, according to an 8-K document AOL filed with the U.S. Securities and Exchange Commission.

TAGS: Microsoft,patents,AOL



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