AOL Sells 800 Patents For $1 Billion To Microsoft | Hacker News Reader

AOL Sells 800 Patents For $1 Billion To Microsoft

techcrunch.com

Last I checked the highest value for patents was around $800,000/patent. This puts it at $1.25 million/patent. The crazier this becomes and big companies invest more billions into worthless patents, the harder these companies will fight against patent reform or abolishing software patents in the future, simply because they will not want their investment to be wasted.

So what can we expect from Microsoft to do with these web based patents, now? Start going after big and popular websites to pay them a "license" because they infringe on some undisclosed (of course) patents they own? The web patent war seems to be upon us.

Indeed, the patent wars are in full swing. Newcomers can expect to be frozen out. Apple , Microsoft, and Google may agree to not sue each other into oblivion and gang up on any newcomer. Perhaps they will start acting like a cartel.

Since when has Google given any indication of going after newcomers with patents. Don't group them with Apple and MS.

Their refusal to clarify what they intend to do with Motorola's standards essential patents groups them in with Apple and MS.

It's perfectly consistent with using patents only defensively, while Apple and MS are currently suing newcomers left and right.

Examples? Apple doesn't seem to sue individuals over patents. They are very aggressive about defending trademarks, though. Microsoft has a history of defending their so-called technologies like FAT and SMB, much to the dismay of many, but have lightened up in recent years.

It may be consistent but suing over standards essential patents is dishonest. Arguably it's worse than what Apple and MS are doing.

"I'm going to fucking kill Google" -- Steve Ballmer[1]

"I'm here to destroy [Google]" -- Steve Jobs[2]

Maybe not the coziest of cartels.

[1] http://battellemedia.com/archives/2005/09/ballmer_throws_a_c...

[2] http://9to5mac.com/2012/04/05/biographer-disputes-google-ceo...

"We've always been at war with Eurasia."

Bickering amongst the titans of tech doesn't mean they won't gang up on issues they deem to be mutually beneficial, and often those are at odds against startups.

Those are fairly arbitrary numbers company's have won 100's of times that from a single patent. Granted, after a rather expensive legal battle, but licencing fees can also be vary significant. I suspect that's more the average for patents that have not been litigated or licensed.

Like Yahoo, a dying internet giant is looking to unlock the value of its patent portfolio.

AOL did it in a way that won't blacken its reputation in the tech world. But it also won't be able to get recurring revenue from the majority of its patents.

What's interesting to me is that AOL is so focused on how this money will flow back to shareholders. It's like Tim Armstrong is buying himself some breathing room with the street to get his business (media/ad sales) moving in the right direction.

That's 10 cents per share, considering their EPS is 14 cents, it's a pretty good deal. I wonder how they intend to invest that cash though, on the surface it seems the thing to do would be to return it to shareholders.

It is a good deal. A few days ago there were speculations AOL would get much less for it: http://www.bloomberg.com/news/2012-03-29/aol-inc-s-patent-sa...

"AOL Inc.’s Patent Sale May Yield $290 Million … It’s worth much less than what investors have estimated, based largely on the fact that most of AOL’s patents are not commercially viable, or junk grade.

> a dying internet giant is looking to unlock the value of its patent portfolio.

Selling it to another dying giant that will use it against each and every competitor that doesn't have a cross-licensing agreement.

Microsoft is a dying giant?

> But it also won't be able to get recurring revenue from the majority of its patents.

True, but $1b is so much money that it probably overvalues the lifetime revenue AOL would be able to get from the patents, even assuming they'd step up aggressive enforcement leading to licenses/settlements. They would need a few really big wins out of those 800 patents for the average lifetime revenue to top $1.25m/patent.

IMHO the biggest way to look at this is compared to AOLs normal revenue and valuation. AOL did just over 2B in revenue last year, and is currently valued at a bit under 2B (well, for the next 8 minutes). To raise 1B in cash in a patent sale just gained Tim at least a full year if not two of runway to complete his turn around plan.

Or to fail and still retire filthy rich. When the reward for failure is more than you need to comfortably retire, what's the rational incentive to succeed?

He could have retired filthy rich when he left Google.

Money is not everything for people like him, and even when it is, often it's about sustainability and providing long-term for his dear ones. A one-time payment which screws his monthly income and his resume at the same time doesn't fit at all in this picture.

It all depends on the one-time payment and the size of the failure. And even that is relative - Mark Hurd and Richard Belluzzo come immediately to mind.

A one time payment of several hundred million and you are pretty okay.

Ask HN: How much (if at all) does your employer reward you for filing a patent?

I believe the norm is a few thousand dollars, which makes this valuation even more sickening. I hate the stifling nature of the current US patent laws, and hate the idea of spending my time pretending to be a lawyer rather than an engineer. But, if a patent is so valuable, it's disappointing if a company does not reward the "inventor" proportionately.

Sometimes you get a percent of profit for the patented applications but it is usually a lower percent (think 1-7%) and I don't know how it would factor in a sale like this.

This is more for non-software patents though

At the places I've worked it doesn't make a difference. You get paid for patent approvals (and at one place, for filings and approvals). Doesn't matter what the patent is for: software, electronics, mechanical, chemistry...

Why pick on patents? I can't think of any employer who rewards workers "proportionately" unless they are on direct commission.

I was one of a small group of engineers that developed a product that has earned the company many millions of revenue. "All" I get is a salary.

I single handedly coded something that had a direct saving to the company of $3 million. "All" I got was a salary.

At least if I'm awarded a patent, I get a few hundred $$$ out of it.

And slowly the cracks begin to show in this system.

This reeks of desperation. I wonder if there's ever been a study on the correlation between IP litigation and a country's decline.

IP litigation seems a pretty recent thing. What would such a study include? How many countries had IP laws and periods of litigation?

Patents have been around since ancient Greece (http://en.wikipedia.org/wiki/History_of_patent_law). I don't know anything about its pattern of litigation though.

There is certainly a correlation between IP litigation and a company's decline, and the scary thing is that all companies decline sooner or later and think what would happen if IBM for example started to become desperate and started to sue everyone who might infringe in any of their patents, they could completely stop half of world's economy for years.

Patents are very much like money: A sheet of printed paper, worthless in itself. The people, their belief and expectations give them value.

In fact most of human existance is like that. Religeon. Law. Banking. Civil obedience. Language. Property. Scary when you think about it. What's the odds we'll meet another alien race with anything close to our expectation on anything?

Not exactly. If you look on your friendly dollar bill, you will see "this note is legal tender for all debts public and private." Turns out USG says you can pay both taxes and court settlements with that paper. It's not just a belief that makes it valuable, it's the weight of the government of the largest economy on the plant and it's promises. Turns out the promises of Zimbabwe carry less weight.

Interestingly though, your comparison between money and patents seems very good. Both are sheets of paper that USG promises to enforce with it's legal system.

This type of defensive purchase by Microsoft just perpetuates the problem with software patents.

Maybe Bill should return from philanthropy, reinstate his position as CEO, burn these patents for the betterment of entrepreneurism, and resign to continue building his social-committed legacy. That's the irony in my eyes.

Even if Bill Gates wanted to do this, he doesn't own a controlling stake of Microsoft or anything near it, so it's not like he can just go around reinstating himself as CEO whenever he pleases.

I understand, simply stating an ideology.

I wonder how long it will be before Microsoft files anti-competitive lawsuits using them.

That's unlikely. From the official statement: "AOL also received a license to the patents being sold to Microsoft."

How about the rest of the world other than AOL?

Is one of those patents "A novel technique for running a company into the fucking ground"?

Considering the absolutely massive amount of prior art that exists for that, I'd say yes.

That is not a scaleable business model :P

How many schools could that have built?

There's a low intensity war going on between Motorola (Google) and Microsoft. Motorola apparently wants tens of dollars per product for a few standard patents when thousands of other patent holders combined get much, much less.

"Microsoft said Motorola Mobility is seeking $4 billion a year for licensing 50 patents on video compression. The entertainment division of Redmond, Washington-based Microsoft generated $8.9 billion in sales last year. Microsoft’s total revenue was $69.9 billion in the fiscal year that ended June 30, 2011.

The software maker said it pays $6.5 million a year to a group of 29 companies with 2,339 patents that cover the same industry standard. " http://www.bloomberg.com/news/2012-04-02/motorola-mobility-w...

Microsoft had to move it's distribution headquarters out of Germany because of Motorola lawsuits.

So, grab your popcorn. There is no love lost and no "good guys," just companies trying to profit and ideally drive the other out of business.

>Microsoft pays $1 billion dollars to AOL to prevent other companies from innovating.

FTFY

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