Microsoft Pays $1 Billion For 800 AOL Patents

The move is the latest in a series of high-profile patent deals in which Microsoft, Google, Apple and other IT vendors have spent billions of dollars to build up their patent portfolios.

In addition to acquiring 800 patents outright, the deal gives Microsoft "a non-exclusive license to [AOL's] retained patent portfolio," AOL said. AOL also retained a license to use the patents it is selling to Microsoft as part of the deal.

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The companies expect to formally complete the deal by the end of 2012. It requires a number of regulatory approvals, including meeting antitrust regulations.

The companies did not disclose the specific technology patents Microsoft is buying.

"This is a valuable portfolio that we have been following for years and analyzing in detail for several months," said Brad Smith, Microsoft general counsel and executive vice president for legal and corporate affairs, in a statement.

AOL said its retained portfolio of 300 patents cover "core and strategic technologies" such as advertising, search, content generation and management, social networking, mapping, multimedia and streaming and security, among others.

The deal follows what Smith described as "a competitive auction" for the patent portfolio, suggesting that other companies had bid to acquire the patents. By winning the bidding, "Microsoft was able to achieve [its] two primary goals: obtaining a durable license to the full AOL portfolio and ownership of certain patents that complement our existing portfolio," Smith said.

AOL said it intends "to return a significant portion of the patent sale proceeds to shareholders."

IT vendors have been racing to arm themselves with broad patent portfolios as the pace of patent litigation picks up. A long-running patent dispute between Oracle and Google is scheduled to go to trial next week, for example. Last month Yahoo sued Facebook, charging the social networking company with violating 10 Yahoo patents relating to how companies generate revenue from free Internet services.

Google has acquired more than 2,000 patents from IBM in a series of transactions. And Motorola's extensive patent portfolio is believed to be a major driver of Google's pending $12.5 billion acquisition of the mobile device manufacturer.