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AOL Grants Microsoft non-exclusive License of 800 Patents for $1.056 Billion

Finally, after years of eying on AOL’s patents, Microsoft has sealed the deal. AOL on Monday April 9th, announced that Microsoft will buy 800 of its patents for $1.056 billion.

The deal is expected to be completed by the end of 2012.

Following the sale, AOL will retain significant patent portfolio of over 300 patents and patent applications spanning core and strategic technologies, including advertising, search, content generation/management, social networking, mapping, multimedia/streaming, and security among others. Those 300 additional patents and patent applications will be non-exclusive to Microsoft, however. As part of the deal, AOL has been granted a license to the patents it has sold to Microsoft.

Part of what AOL is selling (at a loss) is the underlying patents for the old Netscape browser.

Following, the announcement at around 12:45pm Eastern, AOL stock was trading at $26.76 per share — i.e. a 45 percent increase from Friday’s closing price, and the highest since November 2010.

Microsoft would not say which patents it has purchased, but said, “This is a valuable portfolio that we have been following for years and analyzing in detail for several months,” Microsoft attorney Brad Smith said in a statement.

“The agreement with Microsoft represents the culmination of a robust auction process for our patent portfolio,” said Tim Armstrong, AOL’s Chairman and CEO. “We continue to hold a valuable patent portfolio as highlighted by the license we entered into with Microsoft. 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,” adds Armstrong.

Microsoft currently owns over 70,000 patents worldwide, including 20,000 issued in the U.S. The company has 15,000 U.S. patent applications pending. This new deal with AOL could help Microsoft better position itself for further lawsuits or defend against lawsuits as tech companies scramble to stay ahead of each other in the fast-moving patent litigation system.

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