NEW YORK — Faltering Internet icon AOL was able to squeeze out more than $1 billion from Microsoft for a trove of about 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, an analyst with BGC Financial 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, searching and mapping. That would help Microsoft go up against Google, 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 both for attack — for suing competitors — and for defense — for warding off lawsuits with threats of countersuits.
Rising star Facebook, for instance, recently purchased 750 patents from IBM, a move that probably helped the company defend itself 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 such as a cellphone. Google is buying phonemaker Motorola Mobility Holdings for $12.5 billion, in large part to get hold of its patents.
AOL's move signals that it's listening to stockholders, who are asking for more return on their investment. In February, one of AOL's largest shareholders, an investment firm, said it would nominate candidates for the company's board because it wasn't doing enough to make money from its patents. AOL said at the time that it had already begun to look at ways to unlock patent value.
After the sale, AOL said, it will still hold more than 300 patents and applications covering a variety of technologies, including advertising, searching, content generation, social networking, mapping, multimedia and security, among others.
"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," AOL chairman and chief executive officer Tim Armstrong said in a statement.
AOL said it will determine the best way to distribute a "significant portion" of the sale proceeds to shareholders before the sale closes, which is expected to happen by the end of this year.