Facebook reaches agreement with Microsoft to buy 650 of AOL’s patents for $550M

Facebook and Microsoft have today announced an agreement in which Facebook will purchase $550M in patents from the company. This represents a portion of the patents that Microsoft recently agreed to acquire from AOL.

The acquisition agreement between Microsoft and AOL gave the Redmond giant control of 925 U.S. patents and applications and a general license to the rest of AOL’s portfolio of around 300 patents. This deal will give Facebook complete ownership of some 650 of those purchased patents and will give the company a license to all of the AOL patents that Microsoft bought.

Basically Facebook bought itself both exclusive rights to a big chunk of those patents, and got itself a cross-licensing deal for the remaining 275 patents and applications that Microsoft will hold. Microsoft, of course, will also have license to the patents that will be owned by Facebook, as well as the 300 that AOL still holds.

Microsoft gets a big chunk of the cost of purchase defrayed, while maintaining a license for everything that AOL used to own.

Facebook gets a bunch more patents that it says will help it ‘protect itself’. “This is another significant step in our ongoing process of building an intellectual property portfolio to protect Facebook’s interests over the long term,” said Facebook general counsel Ted Ullyot.

So the final patent score of today’s deal, if you’re interested, is this:

• AOL: 300 patents
• Facebook: 650 patents, 275 of Microsoft’s patents
• Microsoft: 275 patents, 300 of AOL’s patents, 650 of Facebook’s patents
• Everyone else: “Oh crap.”

This turns out looking like the sweetest deal for Microsoft, which retains licensing to all of the patents, including the ones it purchased outright, the ones that AOL is keeping and the ones that Facebook is acquiring. It also gets a large chunk of the money back from the deal, which helps it look good on the balance books. Facebook gets access to Microsoft’s patents as well as the ones it is purchasing outright, increasing its potential protection.

It’s important to note that the volume of patents purchased does not have any inherent significance, it’s the actionability and essential nature of those patents that gives them value. That being said, it’s likely that Facebook’s patent lawyers did their due diligence, so it’s likely that they have some validity in the protection of Facebook products like the timeline, feed, messaging and more.