AOL to sell more than 800 patents to Microsoft

NEW YORK — Faltering Internet icon AOL was able to squeeze out more than $1 billion from Microsoft for a trove of some 800 patents in an auction, the latest sign of just how valuable such portfolios can be for the world’s biggest technology companies.

“There is a fight for market share occurring on multiple fronts: technology, patents, advertising,” said Colin Gillis, a BGC Financial analyst who covers Microsoft. “Microsoft, more so than others out there, has been (using) its patent portfolio as a way to generate license fees. This should strengthen that.”

Microsoft refused to say what the patents cover. Benchmark analyst Clayton Moran said they revolve around Internet technology, including advertising, search and mapping. This would help Microsoft go up against Google Inc., a big rival that is ahead of it in all three areas.

Patents have become a hot commodity in the high-tech industry in recent years. They’re useful for attack — suing competitors — and defense — warding off lawsuits with threats of countersuits.

Rising star Facebook recently bought 750 patents from IBM, a move that likely helped defend it after Yahoo accused it of violating 10 Yahoo patents. Facebook shot back with its own lawsuit, claiming Yahoo is violating 10 Facebook patents. Software patents can have broad applications, and thousands of patents can apply to a complicated product like a cellphone. Google is buying phone maker Motorola Mobility Holdings Inc. for $12.5 billion, in large part to get hold of its patents.

AOL’s shares surged to their highest level in more than a year after the announcement. AOL agreed to sell 800 of its patents and license others to Microsoft for about $1.06 billion in cash. The New York-based Web site developer and Internet access company said it plans to return some of the sale proceeds to its shareholders. After the sale, AOL said it should have about $15 per share of cash on hand. AOL said it will still hold more than 300 patents and applications covering technologies including advertising, search, content generation, social networking, mapping, multimedia and security.