Microsoft Buys AOL Patent Portfolio for Over $1 Billion - The UpStream

Microsoft Buys AOL Patent Portfolio for Over $1 Billion

posted Saturday Apr 14, 2012 by Nicholas DiMeo

Microsoft Buys AOL Patent Portfolio for Over $1 Billion

AOL announced a couple weeks ago that it would be selling its 800 patent portfolio to the highest bidder. Rumors were flying around that Google might be interested after losing to the Rockstar Consortium with crazy math constants in the Nortel bids. As it turns out, Microsoft swooped in and picked up the portfolio this week at a hefty $1.3 billion price tag.

What's in this portfolio that warrants such a high price and why is this important? The full story is after the break.

The patents sold are all involving advertising, search, e-commerce and mobile - everything Microsoft has its hand in at this point in time. Microsoft also picked up AOL current and former businesses Netscape, ICQ, MapQuest, CompuServe and, among others. We are told that AOL Chief Executive Tim Armstrong actually dialed up Microsoft's Steve Ballmer to inform him of the decision to sell the patents to see if he was interested.

Bids were also placed by Amazon, eBay, Google and Facebook, however on April 5th, Microsoft turned out to be the victor when the dust settled. Big tech companies have all been jockeying for patent positioning as of late, as they look to try and take out the competition like we've seen with Kodak and Nokia being targeted by Apple for patent infringement. Shoring up a company's portfolio gives them the option to either go after the others who may (or may not be) copying ideas or keep them at bay by simply threatening to sue.

This is one of the larger sales to date, with each patent selling for about $1.3 million, where in the $4.5 billion Nortel sale last year, each patent went for $1.05 million. That sale, however, is what sparked AOL to try and sell off their portfolio in order to make some quick cash. Analysts were surprised at the sale of these 800 patents, though, as they expected the lot to sell for no more than a "few hundred million" according to several sources. At the end of the day, AOL says the a "significant portion" of the sale will be passed through to the shareholders of the company.

AOL will remain holder of about 300 patents that are directly tied to their current operations and will be given a license to the patents sold off to Microsoft. Microsoft will also receive a non-exclusive rights agreement to the patents that AOL is keeping.

The deal should be completed by the end of this year and if by some chance the deal should fall through, Microsoft will owe AOL a termination fee of $211 million. This brings Microsoft's portfolio to over 20,000 patents, which is about four times more than what Apple currently holds.


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