In the latest episode of As the Tech Patents Turn, struggling online giant AOL has sold over $1 billion in patents to Microsoft in a bid to appease shareholders. For Microsoft, the acquisition of more than 800 AOL patents comes during a time of vicious and aggressive technology patent cross-licensing and litigation.
Still, a question remains. Did Microsoft overpay for this asset?
"This is a valuable portfolio that we have been following for years and analyzing in detail for several months," Microsoft General Counsel and Executive Vice President Brad Smith said. "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."
AOL auctioned off its patents in response to legal action from activist shareholders who complained that the ailing online giant had done nothing to leverage the value of its patents. The shareholders complained that these patents were an "underutilized asset" and should be aggressively sold or licensed.
With this sale, which should be finalized sometime this year, AOL says it will return a "significant portion" of the proceeds to shareholders. It will announce its plans when the transaction is closed.
Meanwhile, there are questions about the value of AOL's patent portfolio. Though Microsoft paid a whopping $1.056 billion for the patents, plus a nonexclusive license to other technologies AOL is retaining, an advisory firm estimated just two weeks ago that the patent sale could be worth as little as $290 million. The firm, M-Cam, said at the time that AOL's patents were "not commercially viable, or junk grade."
Of course, in this climate it's hard to place an exact value on patents, which are at the center of dozens of legal skirmishes around the world involving almost all major technology firms. Microsoft has been notoriously aggressive in this arena, cross-licensing its various patents with any takers. Some companies, like Apple, have taken a decidedly more litigious route, however, and are attempting to prevent competitors from even selling their products in certain markets.