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Patents arsenal: Why Facebook is buying

Patents accumulation is key strategy as Facebook prepares to go public. It bought $550 million worth of patents from Microsoft.

By Jessica GuynnLos Angeles Times (MCT) / April 25, 2012

Facebook Vice President of Product Chris Cox delivers a keynote address at Facebook's "fMC" global event for marketers in New York City in this February file photo. After Microsoft spent $1 billion to buy AOL patents, it sold most of them to Facebook for $550 million.

Mike Segar/Reuters/File

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LOS ANGELES

Microsoft Corp., which just bought patents from AOL Inc. for more than $1 billion, is now selling most of them to Facebook Inc. for $550 million.

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The two companies said Monday that Facebook is buying about 650 of the 925 patents and patent applications. Facebook will get a license to use the rest of the patents. Microsoft will also get a license to use the patentsthat Facebook is buying.

"Today's agreement with Microsoft represents an important acquisition for Facebook," said Ted Ullyot, Facebook's general counsel, in a written statement. "This is another significant step in our ongoing process of building an intellectual property portfolio to protect Facebook's interests over the long term."

Facebook is loading up its intellectual property arsenal as it prepares for an initial public stock offering and fights a lawsuit brought by Yahoo Inc. last month. Facebook is countersuing.

The patents purchase comes amid accelerating litigation over who owns the rights to key technological innovation, particularly in the mobile arena. Facebook bought 750 patents last month from International Business Machines Corp.

The AOL patents fetched three times what analysts had expected, but now Microsoft has essentially gotten back half of what it paid. Microsoft is a Facebook partner, having bought a 1.6 percent stake in the social networking giant in 2007 for $240 million.

"Facebook is just getting in the game. It goes to show that if you are a significant player in this landscape, you have to have patent protection," BGC Partners analyst Colin Gillis said. "Facebook realizes it's a target."

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