AOL said it was an all-cash deal and reassured investors the deal leaves AOL with "a significant patent portfolio of more than 300 patents and patent applications spanning core and strategic technologies."
In addition to the sale, AOL will sign 300 licensing agreements with Microsoft. In turn, it will license all of the patents it is selling to Microsoft while Microsoft will have access to the 300 AOL patents it is not purchasing.
The deal is one of a series of patent sales or auctions in recent years with technology companies on the prowl for patent portfolios that will protect them in court.
It has come to the point where research and development includes two separate and distinct strategies: Develop something new or sue a rival company for patent overlap.
The new environment was clearly outlined by Motorola last week. In one instance, Motorola was sued by a consumer for allegedly failing to upgrade a mobile handset after promising to do so. Concurrently, the European Commission said it would investigate Motorola to see if it had "abusively … used certain of its standard essential patents to distort competition."
Essentially, the core of the investigation concerns patent-hoarding. By law, key innovations must be shared, through viable licensing, if it is ruled that to otherwise hoard an innovation would hold an entire industry hostage.
The industry standard is known as FRAND, which stands for fair, reasonable and non-discriminatory licensing obligations.
For the AOL-Microsoft deal, "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," said Brad Smith, general counsel and executive vice president of legal and corporate affairs at Microsoft.
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