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Microsoft's AOL deal intensifies patent wars

business Updated: Apr 10, 2012 22:06 IST
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The global gold rush in technology patents gained speed on Monday when Microsoft agreed to pay more than $1 billion for 800 patents held by AOL.

The lofty price - $1.3 million a patent - reflects the crucial role that patents are increasingly playing in the business and legal strategies of the world's major technology companies, including Microsoft, Apple, Google, Samsung and HTC.

Patents that can be applied to both smartphones and tablet computers, which use much the same technology, are valued assets and feared weapons, as the market for those devices booms. Companies are battling in the marketplace and in courtrooms around the world, where patent claims and counterclaims are filed almost daily.

"Microsoft is increasing its arsenal, even if it is expensive," said James E Bessen, a patent expert.

And AOL, an online pioneer, is increasingly shifting its focus to media, acquiring The Huffington Post and TechCrunch, a technology news and gossip site. The patents it is selling include early Internet patents that involve search, e-mail, instant messaging and custom online advertisements, according to an analysis by 3LP Advisors, a patent consulting firm in Silicon Valley.

"This is all stuff that companies want to - and are putting in smartphones," said Kevin G. Rivette, a managing partner of 3LP.

Microsoft has used its deep stockpile of computing patents to prod smartphone makers to pay it licensing fees. So, analysts say, adding more patents promises to strengthen its negotiating and legal position with rivals like Google and Apple - and handset makers using Google's Android software including HTC, Samsung and LG.

Prices for patents are rising as big firms load up. Google last August agreed to pay $12.5 billion for Motorola Mobility, a mobile phone maker with 17,000 patents.

That portfolio, analysts estimate, could represent more than half the value of the deal, or more than $400,000 a patent.

Apple and Microsoft teamed up in 2011 with four other companies to pay $4.5 billion for the 6,000 patents held by Canadian telecommunications maker Nortel Networks. That worked out to $750,000 a patent, experts say.

Last month, Facebook said it had bought 750 patents from IBM for an undisclosed sum, shortly after the social networking giant was hit with a patent lawsuit by Yahoo.