The deal comes as the social network prepares for its initial stock offering and looks to protect itself in an increasingly litigious intellectual property environment. Yahoo sued Facebook last month, alleging infringement of 10 patents.
Update: Microsoft has issued a press release on the deal.
The deal covers a portion of the patents that Microsoft paid $1 billion earlier this month to acquire from AOL.
In that auction, Microsoft got the ability to own or assign some 925 patents from AOL, plus a license to AOL’s remaining patents, including 300 patents not for sale. Facebook had also been interested in the AOL patents, according to Bloomberg.
Microsoft is hanging on to about 265 of the patents it bought from AOL.
REDMOND, Wash. and MENLO PARK, Calif. — April 23, 2012 — Microsoft Corp. and Facebook announced today a definitive agreement under which Microsoft will assign to Facebook the right to purchase a portion of the patent portfolio it recently agreed to acquire from AOL Inc. Facebook has agreed to purchase this portion for $550 million in cash.
In the initial AOL auction, Microsoft secured the ability to own or assign approximately 925 U.S. patents and patent applications plus a license to AOL’s remaining patent portfolio, which contains approximately 300 additional patents that were not for sale.As a result of today’s agreement, Facebook will obtain ownership of approximately 650 AOL patents and patent applications, plus a license to the AOL patents and applications that Microsoft will purchase and own.
Upon closing of this transaction with Facebook, Microsoft will retain ownership of approximately 275 AOL patents and applications; a license to the approximately 650 AOL patents and applications that will now be owned by Facebook; and a license to approximately 300 patents that AOL did not sell in its auction.
“Today’s agreement with Facebook enables us to recoup over half of our costs while achieving our goals from the AOL auction,” said Brad Smith, executive vice president and general counsel, Microsoft. “As we said earlier this month, we had submitted the winning AOL bid in order to obtain a durable license to the full AOL portfolio and ownership of certain patents that complement our existing portfolio.”
“Today’s agreement with Microsoft represents an important acquisition for Facebook,” said Ted Ullyot, general counsel, Facebook. “This is another significant step in our ongoing process of building an intellectual property portfolio to protect Facebook’s interests over the long term.”The parties are evaluating the accounting treatment for these transactions. These transactions are also subject to customary closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.