Microsoft and Facebook announced on Monday, April 23, 2012, that Facebook is acquiring 650 patents from Microsoft, that the latter acquired earlier this month from AOL, for $550 million in cash. As part of this transaction, Facebook will obtain a license to the other AOL patents and patent applications being acquired by Microsoft and will grant Microsoft a license to the AOL patents and patent applications that it acquires. Bloomberg reported last week that Facebook had initially bid on the AOL patents but later lost out to Microsoft.
Microsoft had "Friended" Facebook years ago. First there was an ad revenue sharing agreement and then Bing started indexing public Facebook posts. Bing also became the go to search engine on Facebook. In October 2007, Microsoft reportedly edged out rivals such as Google to buy a 1.6% stake in Facebook for $240 million. It was a major vote of confidence and a valuation that at the time was called "astronomical" by the New York Times. At the time, Facebook trailed in size behind Myspace, and had revenue of only $150 million annually. Microsoft's stake is now valued at an estimated $1 billion plus.
Facebook founder Mark Zuckerberg, like Bill Gates, dropped out of Harvard to found his company. In 2010, Zuckerberg joined Microsoft's Bill Gates and Warren Buffett in signing the "Giving Pledge," a commitment to give away a majority of his fortune.
ZDNet's Emil Protalinski's been following the Microsoft Facebook friendship for some time now.
But the AOL patents deal may be about rivals, even though it is among friends. For example, PC World suggested the reason Microsoft paid a rich premium valuation for the AOL patents in the first place was to go on the offensive with Google for the 265 patents that were of strategic importance to it. Although patent research firm Envision IP calculated that only 29 of the AOL patents related to social media, Facebook, which is currently in a bitter public patent dispute with Yahoo ahead of its IPO, may have gone on the offensive to strengthen its intellectual property (IP) fortress.Yahoo responded to Facebook's AOL patent acquisition with its own take, which ZD Net published.
According to TechCrunch, which is owned by AOL, Facebook started 2012 with only 56 patents. Since then, it has acquired 750 patents from IBM for $83 million (according to its amended registration statement), patents related to the Instagram acquisition, and now 650 patents from AOL for $550 million. This brings the total patents owned by Facebook to 1400, and it has another 600 patents pending globally.
Related news: Facebook May Have Bid on AOL Patents
There has been a series of recent patent deals between technology companies as they try to defend themselves in lawsuits. What a good way to avoid such conflicts but always hope that they will be responsible.
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