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Microsoft, Facebook Announce $550 Million Patent Deal

In a half-billion dollar cash deal between two technology titans, Microsoft agreed to sell up to 70% of the patents it recently acquired from storied AOL just two weeks earlier for about twice that sum (US$ 1.056 billion) in cash. Terms of the Microsoft/ Facebook deal include ownership of 650 AOL patents and patent applications, plus access (via license) to the patents and filings that Microsoft will retain. 

A Classic Flip Strategy

In what looks to be a classic flip strategy, the deal seems more characteristic of the real estate industry than high tech. It was explained by Microsoft General Counsel Brad Smith this way:  

Today’s agreement with Facebook enables us to recoup over half of our costs while achieving our goals from the AOL auction. 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.”

Facebook is touting the deal as "…building an intellectual property portfolio to protect Facebook's interest over the long term," according to Facebook's General Counsel Ted Ullyot. But in the mobile kingdom that both companies serve with software and services, patent wars are raging over intellectual property rights and software implementation found in the latest smartphones, tablets and other devices.

Arms for the Patent Wars

Some analysts see the Microsoft/ Facebook patent deal as going beyond "technology alignment," calling it a power shift, and "…almost certainly a move against Google," according to Rebecca Lieb, Altimeter Group analyst, recently quoted in the Bits Blog, a New York Times technology story on the subject. 

The patents range from mobile, Web and instant messaging technologies, along with search and other core technologies developed over the storied 29-year history of AOL's past. Contrast that with Facebook's launch in 2004 and it's not hard to understand why the company would want to beef up its IP portfolio in the face of the current litigious tech culture. Facebook is already in a patent fight with Yahoo, so all indications are that, if anything, the patent wars are spreading. 

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While the search engine battle between Google and Microsoft rages, Facebook is aligning with Microsoft

As for Microsoft, the company has been at odds with Google since the early days of the search engine. Google claims 66.4% of all online searches in the US, and rival Bing, from Microsoft, handles about 15.3%, according to comScore. But the tides are shifting now, and with more than 800 million subscribers, Facebook is emerging as a giant in social media with the power to challenge Google's hold in the online domain, not just in search but the lucrative advertising as well. 

 
 
 
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