AOL does $1.2b sort out Microsoft as patent war heats up

Faltering internet icon AOL was ready to squeeze out greater than US$1 billion ($1.2 billion) from Microsoft for a trove of 800 patents in an auction, the most recent sign of just how valuable such portfolios could be for the world's biggest technology companies.

"There's a fight for market share occurring on multiple fronts technology, patents, advertising," said Colin Gillis, an analyst with BGC Financial who covers Microsoft. "Microsoft, more so than others available in the market, was [using] its patent portfolio to be able to generate licence fees. This could strengthen that."

Microsoft refused to assert what the patents cover. Benchmark analyst Clayton Moran said they revolve around internet technology, including advertising, search and mapping. This will likely help Microsoft go up against Google, a tremendous rival it's in advance of it in all three areas.

Patents are useful both for attack - for suing competitors - and for defence - for heading off lawsuits with threats of countersuits. Facebook recently bought 750 patents from IBM, a move that likely helped the corporate defend itself after Yahoo accused it of violating 10 Yahoo patents.

Software patents may have broad applications, and thousands of patents can apply to a sophisticated product like a cellphone.

Google is buying phone maker Motorola for US$12.5 billion, largely, to pay money for its patents.

AOL's shares surged to their highest level in additional than a year following the announcement.

AOL said it plans to come a number of the sale proceeds to its shareholders.

After the sale, AOL said it will still hold greater than 300 patents and applications covering a number of technologies, including advertising, search, content generation, social networking, mapping, multimedia, and security among others.

AOL also received a licence to apply the patents it sold to Microsoft. AOL owns news sites akin to Huffington Post, Engadget and Techcrunch, but still makes much of its money by providing dial-up internet access.

- AP

By Barbara Ortutaya