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A person walks past a Microsoft sign on January 22, 2009 in Redmond, Washington. (Robert Giroux/Robert Giroux/Getty Images)
A person walks past a Microsoft sign on January 22, 2009 in Redmond, Washington. (Robert Giroux/Robert Giroux/Getty Images)

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Microsoft escalates patent wars Add to ...

Microsoft Corp. has opened up a pricey new front in the patent wars. The software giant is spending $1.1-billion (U.S.) to buy over 800 of them from AOL. At more than $1-million apiece, it tops even the huge rates paid recently for other intellectual property. This first salvo in the Internet space is a direct challenge to Google and Facebook.

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Last year, the action was centred on smartphones. For reasons both offensive and defensive, Microsoft, Apple and Google spent astonishing sums to acquire related patents. Nortel’s were sold from a bankruptcy auction for about $750,000 each, while on average Motorola Mobility’s and Novell’s fetched approximately $500,000.

The prices weren’t justified on the licensing fees the patents could generate. Rather, they reflected a certain strategic value. Patent owners can sue rivals, exclude certain technologies from appearing on devices manufactured by other companies or extract licensing fees for their use. Further, tech is often a winner-take-all game, and mobility is the big shift taking place. So buyers were willing to pay over the odds to keep key patents from competitors.

Microsoft’s acquisition of these AOL patents escalates the dynamic – and in a new area. Not only is it paying more per patent, but it is buying inventions related to instant messaging, social networking, search, security and advertising. Those sorts of technologies represent much of the future for Google and Facebook.

Many of these particular patents could prove tactically significant. In its day, AOL was an Internet king and along the way took over early rivals to the throne, including MapQuest, CompuServe and Netscape. More than just an intriguing page of antitrust history, those firms could leave behind ammunition in the ongoing battles over Web browser displays and maps.

The price and nature of the AOL sale strongly suggests the patent conflicts are spreading. Relatively patent-poor newcomers like Google and Facebook find themselves on the back foot in this arena. Other battle-tested webbies, like Yahoo, however, could find themselves with just a bit of fight left yet.

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