Bold Patent Moves Bolster Facebook, MSFT

Cash Rich, IP-Savvy MSFT Embraces Role of Patent Dealmaker

After acquiring 800 patents and scores of applications and licenses from AOL for $1.1B just two weeks ago, Microsoft has said that it has flipped the bulk of the portfolio, 650 patents, to Facebook for $550M, securing the IP assets and licensing MSFT needs while recouping almost half of its original potentially bargain cost.

It was reported today in Venture Beat that MSFT wanted to partner with FB all along, but that AOL put the cabash on it. IP CloseUp is not buying that.

In a pre-IPO buying frenzy that has to concern some shareholders, FB has a costly portfolio of quality patents to its $1B acquisition of Instagram two weeks ago. You have to wonder if investors believe that despite FB’s lofty market valuation whether it has the firepower to succeed as a major growth company. These recent moves are sure to help. In March, Yahoo sued Facebook, alleging Facebook violated ten Yahoo patents related to online advertising and web communications.

“Stinking Mad”

Sources have told IP CloseUp that Facebook was “stinking mad” that it did not land the AOL patents when they went up for bid several weeks ago, confiding that the failure had more to do with process than cost. MSFT emerges a huge winner, with patents its needs for far less than their true market value (see “Could AOL Patent Sale Have Netted More Than $1B?”) and cash in hand.

You have to wonder how the AOL deal got done. With investor pressure from Starboard Value the company may have been spooked into taking what appeared to a best offer before others were on the table.

“The market was talking about $300M,” speculated one observer. “MSFT may have offered a billion plus if the deal got done immediately.” It did, much to Facebook’s chagrin (and Google’s and Apple’s) and others who may have wanted a shot at controlling AOL’s excellent portfolio, which included original Netscape Internet patents.

A post on the IAM Blog today raised good a question. Will a Department of Justice anti-trust team soon be mobilized to see how recent patent sales are being orchestrated given that some appear to be barely marketed?

*     *     *

For the patent wars this marks new territory. Smart combatants with cash and guts are well-equipped to play. 

Illustration sources: hubspot.com; heavy-downloads.blogspot.com

About Bruce Berman

Independent IP observer, adviser and author.

Trackbacks/Pingbacks

  1. Value of Microsoft’s Facebook Stake Drops Below $1B | IP CloseUp - May 22, 2012

    […] reputedly steaming that it did not have a real opportunity outbid Microsoft in the AOL patent sale. Microsoft stated that it wanted to partner with Facebook to acquire the patents but that AOL was said no to team bidding, possibly because of potential […]

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