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AOL sells patents to Microsoft in $1.1B deal

America Online announced Monday that it has sealed a $1.1 billion deal with Microsoft for more than 800 patents.

According to a news release announcing the deal, the companies entered into a non-exclusive license for the patents, following an auction.

The companies did not say which patents are part of the deal, but a technology company as old as AOL certainly has patents that could prove useful for Microsoft as patent lawsuits continue to rage between some of the industry’s largest companies.

“This is a valuable portfolio that we have been following for years and analyzing in detail for several months,” Brad Smith, Microsoft’s general counsel and executive vice president for legal and corporate affairs, said in the release. “AOL ran a competitive auction and by participating, Microsoft was able to achieve our two primary goals: obtaining a durable license to the full AOL portfolio and ownership of certain patents that complement our existing portfolio.”

Patents are the ammunition used in the legal battles between smartphone, tablet, social media and other competitors who have decided to air their grievances in courts around the world. Microsoft, in particular, has been concerned about Google’s acquisition of Motorola Mobility and the patents the Mountain View, Calif. -based firm will hold once the deal is final.

AOL said that it will return a “significant portion” of the sale’s proceeds to shareholders, and that the deal is expected to close by the end of 2012, after regulatory approval.

There had been suspicion that AOL would leverage its patent portfolio, particularly after another elder in the tech community, Yahoo, launched an aggressive strategy to make money off of its own patent portfolio by suing Facebook.

In remarks reported by All Things Digital last month, AOL chief executive Tim Armstrong compared AOL’s patents to “beachfront property” and said that they “should assume we understand that portfolio, and assume we have a strategy on it.”

That strategy, some suspected, meant litigation — a tactic that hasn’t done any favors for Yahoo’s stock price. The licensing agreement seems to have had a much better effect: AOL stock soared on the news, up nearly 44 percent in early morning trading for a price of $26.67 per share.

Related stories:

Facebook files Yahoo countersuit

Wonkblog: Yahoo sues Facebook. Are software patents out of control?

EU launches 2 antitrust probes against Motorola Mobility following complaints

Hayley Tsukayama covers consumer technology for The Washington Post.



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