Is Microsoft Already Dumping its AOL Patents?

Companies are racing to outdo each other in their bids to acquire more patents to use as defense in potential infringement litigation.

The latest is Microsoft (NASDAQ:MSFT), who led from the front to acquire AOL’s (NYSE:AOL) patent portfolio for $1.06 billion. It pipped Facebook to the post, as the social networking company reportedly didn’t make a high enough offer.

As is custom, the buyer of a portfolio generally keeps the gems and then sells off the remainder, which are not likely to be of much use. Microsoft is likely to keep just a few of the 800 odd patents acquired from AOL, and probably sell the rest to Facebook.

David Berten, founder and partner of Global IP Law Group, a Chicago-based law firm, said, “Often in large portfolios the value is concentrated in a smaller subset of patents, so it can be that in a 800-patent portfolio only 20 contain most of the value.”

Facebook has an $8 billion cash war chest and is in the market to bulk up its patent portfolio, a major factor being its lawsuit with Yahoo (NASDAQ:YHOO). Facebook recently acquired ammunition in the form of 750 patents from IBM (NYSE:IBM).

“If an unfavorable outcome were to occur in this litigation, the impact could be material to our business, financial condition or results of operations,” Facebook said in a March 27 filing, referring to Yahoo.