Facebook is about to write a very big check to Microsoft. Microsoft announced yesterday it is selling hundreds of patents to Facebook for more than a half a billion dollars.
It’s the second big transaction involving tech companies and patents in recent weeks. KUOW’s Deborah Wang has more.
Microsoft already owns more than 70,000 patents. Many of those are home grown, for technology that its own engineers have invented. Others are patents the company has purchased.
But the company is still looking to own more. Earlier this month, Microsoft announced it would pay more than $1 billion for about 800 technology patents owned by AOL. And now it’s turning around and selling most of those to Facebook.
Poltorak: “Patents have emerged as the new currency of the knowledge-based economy.”
Alexander Poltorak is Chairman of General Patent Corporation, the country’s oldest patent licensing firm.
He says technology companies are now keenly interested in buying up patents in order to protect themselves from patent infringement lawsuits. It’s a kind of mutual assured destruction, he says, where the bigger the arsenal, the less likely a company will be sued.
Poltorak says as recently as last summer, technology patents were being sold for about $600,000 a piece. The recent deal with Microsoft, he says, puts the price of a patent at more than $1.3 million.
Poltorak: “Ah, there is no limit, it’s like any commodity, the price is driven by the law of supply and demand. Patents are in limited supply and the demand for the patents is on the rise, and that translates into a rise in prices.”
Microsoft has not announced any details of the patents it acquired, but Poltorak believes the company was most interested buying in patents developed by the big web browser of the 90s, Netscape.
Facebook is also on a patent buying spree. It’s fighting off a patent infringement lawsuit from Yahoo.
Some say Microsoft and Facebook are trying to position themselves against a common enemy. Ed Maguire of the research firm CLSA says its Google.
Maguire: “There’s a little bit of a dynamic of, “the enemy of my enemy is my friend.” But for both companies, an alliance against Google and the potential disruption there clearly offers some benefits.”
Maguire says the patent wars are now becoming the norm for big tech companies with deep pockets, and for the most part, he says, they can afford it. The possible losers are smaller tech companies. They complain that the patent wars are hurting innovation.
Copyright 2012 KUOW