Microsoft Buys 800 AOL Patents For $1 Billion

netbuzz writes "Marking the latest escalation in the technology industry's intellectual-property arms race, Microsoft is paying AOL a shade over $1 billion for 800 patents, the cream of which AOL CEO Tim Armstrong has described as 'beachfront property in East Hampton.' Armstrong insists they haven't left the cupboard bare: 'We continue to hold a valuable patent portfolio as highlighted by the license we entered into with Microsoft. The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value.'"

Comments

First "Me too"?

[Chas]

Do they cover 'leet? Follow-up posting with naught but "me too"? Or do they cover burying the public in excessive copies of useless physical media?

Bullshit

[Anonymous Coward]

"The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value."
Congrats, i think you just made it possible to win bullshit bingo with a single sentence!

Re:Bullshit

[gtall]

I was hoping for "synergistic" and "focus like a laser" to show up. Unless I hear those terms, the company just isn't a serious player in BB.

Come on, now

[HBI]

These guys insist on insulting our intelligence by stating that they're creating 'long term shareholder value' by selling assets. That's BS. The company is worth less today than it was yesterday, and Microsoft is worth more. How is a statement like that not tortious?

Re:Come on, now

[TWX]

Because of the way it was phrased. Arguably, a company with almost no cash and no interest in certain markets but holding patents in those markets could either become a patent troll, or could sell patents and get cash to allow for some kind of possible technological revival.

Would you rather see AOL become the next Rambus?

Personally I wouldn't be surprised if AOL slowly evolves into an e-mail portal for those who have had an address with them and are willing to pay $20 per year to keep that address, but they might be able to make something with the cash, if they're not horrifically stupid.

Re:Come on, now

[HBI]

I don't see how Microsoft being the next Rambus is any better than AOL doing it themselves.

Where has AOL been smart over the last 15 years or so? When the market was saturated for free sign-up CDs, that was about the end of AOL's innovation.

Re:Come on, now

[19thNervousBreakdown]

That all depends on whether you think those patents were worth more, less than, or equal to a billion dollars. It's a reasonable assumption that they were either worth less than a billion dollars, or cash on hand is more valuable to AOL than the potential future earnings the patents represent. A cake next week doesn't mean much to somebody who's starving today.

That doesn't, however, discard the alternate possibilities: Microsoft got a shit deal on a bunch of worthless patents and AOL needs the cash now, or Microsoft got a great deal and AOL just sold the only thing that might have saved them for a short-term boost, or anything in between.

The statement isn't tortious because "tort" is not a synonym for "lie" or "doublespeak" or anything of the sort, and even if it was, a bland sales-lingo statement could hardly be misconstrued as anything to base a business decision on. Maybe you took it that way, but if so, I think I'm safe in assuming you don't have the money necessary to actually be harmed by such a claim.

Re:Come on, now

[wisnoskij]

What? Do you have no concept of what is going on here?
Theoretically they just traded 1 billion dollars worth of useless patents that were just gathering dust for 1 billion dollars that they can use for anything.
They are worth today exactly what they were worth yesterday.
What they do with this influx of money will determine if they gain or lose value as a company.

Re:Come on, now

[Sir_Sri]

It matters what they're worth to the holder. AOL may not have been able to convert those patents into revenue other than by selling the patent outright (and obviously licencing some), whereas microsoft wasn't going to sell a product without the patent covering it. In that case the patents are worth different things to different people. MS may be able to add value, charge more, or make a new product, and being microsoft they will get more sales than if AOL did it.

Account also gets messy, because microsoft has 57 billion dollars cash on hand, or, I guess, 56 now. But with the government bond market paying next to nothing they're losing ~500 million a year to inflation, which is also close to nothing, but still more than MS is getting from sitting on the cash means they're losing PPP value. They *could* pay that to investors instead (dividends basically), but then they'd lose a chunk to tax etc. Part of the 'cost' to microsoft is what else where they doing with that money, what would it be worth next quarter/year.

Right now MS is probably getting 1% return on that cash pile, if they can get 2% on these patents from AOL that's a significantly better deal for them. And if it turns out to be a bad idea they have another 56 billion dollars waiting around, just in case.

Re:Come on, now

[alen]

AOL is a huge blog aggregator now. Engadget, HuffPo, Patch and hundreds of others. the days of the indie blogger are over

Re:Come on, now

[KhabaLox]

The company is worth less today than it was yesterday, and Microsoft is worth more.

How do you figure? You must be reaching the conclusion that the future value of those patents exceed the present value of $1 billion for AOL. Microsoft reached a similar, but different conclusion that the future value of those patents exceeded the present value of $1 billion for Microsoft. They quoted exec even says that these 800 patents "complement" MS's existing patents, so it's quite possible that both companies are worth more after this transaction. Indeed, that is one of the key underpinnings of transactional economics which you don't seem to understand. Both companies freely entered into the agreement based on the belief that they are better off for it. Now, it's possible that the people who made the decisions are wrong (either through corruption or ineptitude), but I don't think that is likely. It's more likely that AOL realizes that it can put $1 billion to better use (e.g. by expanding it's content empire) than those patents.

WOW AOL is still alive

[Isaac-1]

Raise your hand if you knew AOL was still around?

Re:WOW AOL is still alive

[Anonymous Coward]

Huffington Post, TechCrunch, Moviefone, MapQuest, Joystiq, Engadget

In the end

[daktari]

We, as small time tech entrepreneurs, will be able to rest assured that we shall only be sued by either Apple, Microsoft or Google (or a combination of these). That should simplify matters.

BINGO!

[xxxJonBoyxxx]

The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value.

BINGO!

Wow

[jcreus]

Simple maths: 1000000000 / 800 = 1 250 000 USD per patent. Pretty amazing.

1980's: Merger Mania! 2010's: Patent Mania!

[PolygamousRanchKid]

It really seems now that the Big Game Hunt in town is Patent Barter. Having world class patent attorneys, is more important to a company's long term tech strategy, than having world class researchers.

You can come up with something brilliant, truly innovative on the tech front, but be devastated on the patent front. Thus, rendering your research worthless.

Tech patent attorneys. This decade's Arms Race.

Patents expire

[tepples]

Unlike copyrights, patents expire. Patents on behavior seen in 1993, when AOL first connected to Usenet, are due to run out very soon.

AOL patents on networked systems

[maroberts]

It would not surprise me if AOL had useful patents concerning the design of networked systems to handle their millions of users. They were probably the first to encounter the problems that having potentially 25 million+ users would cause.

Re:Microsoft got...

[TaoPhoenix]

As I peruse the article, especially the updates, I don't think each and every one of those patents was exactly hand picked and of equal worth. My guess is that there's a couple of gems in there and a good deal of padding. Yet unfortunately those gems are probably worth more than the Billion.

AOL got slammed as one of the reasons for "Eternal September" yet that influx of users also helped end the "Revenge of the Nerds" attitude towards computing. They deserved what they had at the time, it was fair money earned. Then of course, the rest of the web caught up and passed them, etc. etc. So then the techies laughed at them for being has-beens.

So what's a "Has-Been" to do? Suppose they have a couple killer patents on something related to chat rooms for example. They'll never regain that former glory, so that patent is useless to them because it would take 30 billion and a marketing genius to do a turn-around. So heck, why not sell that killer patent? Maybe it and the 100 related ones are worth $500 million. Then a little last hour negotiating collected a little more cash by requiring that some lesser patents be bundled in there. MS has the money, so they just shrug, and maybe they don't even begrudge AOL the cash - I don't think I've ever heard of *AOL* threatening Microsoft in any year.

So maybe AOL can do something with the cash if they don't run out of time.

How's about some Yankee Innovation????

[sgt_doom]

Hold it, the USCoC (US Chamber of Commerce) says "we have to innovate" our way out of this depression (or recovery, or WTF they douchetard crooks are calling it now). But Micro$oft is simply buying patents --- where's the innovation??? --- while Nathan Myrvhold's Intellectual Ventures is doing patent trolling and strongarming???? Where's the frigging innovation????