In the ongoing patent wars of Silicon Valley, some may remember when Microsoft acquired a large patent portfolio from AOL (News - Alert) back a few weeks ago. Now, the company announced that Facebook (News - Alert) will be given exclusive rights to buy part of that portfolio for the low sum of $550 million. This will give Facebook a good amount of patents that they can now equip themselves to face off any patent related lawsuit, which it seems to be in need of with the recent Yahoo lawsuit against them.
Microsoft (News - Alert) agreed to buy over 925 patents from AOL not long ago, and soon rumors started to circulate on how it may be inclined to let Facebook, a long time partner, use those patents for its own defense. In technology, like in many other industries, patent portfolios are very important. In a cold war style maneuver, each company keeps others at bay from launching lawsuits by having their own patent portfolio with which to strike back.
This presents a problem for a company that doesn't have a lot of patents, like Google (News - Alert) discovered with its Android system back last year. But now, it's Facebook that's being attacked with the recent Yahoo lawsuit, which seems to be conveniently timed just before the social networking site is about to go public.
From the original AOL patent portfolio, Facebook is now going to have access to over 600, which isn't bad since the original price for the whole deal was around $1 billion. But Microsoft is a major investor in Facebook, and people expected that the company might not sit by while Facebook was getting into trouble. Whether or not this particular deal will help them fight Yahoo remains to be seen, but it certainly puts it in a better position.
In most cases, when patent infringement lawsuits are brought forth, the end deal seems to be a license agreement, usually from the company with the least patents, towards the one with the most. Here, Yahoo may not have a lot of hot products on the market right now, but they do have a large amount of patents.
There's no confirmation yet as to when the transfer will occur, and this transaction is subject to government approval, so it may take some time. While the press release doesn't mention the current Facebook legal troubles, there's little doubt what brought this deal. Facebook can certainly afford those patents, and it's a good thing Microsoft was in a charitable mood to sell them.
Edited by Jennifer Russell