Lost in the thunder of Facebook buying Instagram for $1 billion a few weeks ago was Microsoft buying a portfolio of patents from AOL for the same amount, a portfolio which Microsoft has now parlayed into a $550 million cash deal with Facebook. As AllThingsD's Ina Fried reports, "Microsoft is hanging on to about 265 of the patents it bought from AOL," while the $550 million deal will give Facebook access to more than 600 of those patents. "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 of Microsoft, in a statement. "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."
The deal also puts an interesting twist on the "who spent $1 billion better" meme that was floating around at the beginning of the month. Fried writes, "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." At the time of the purchases, Matt Yglesias questioned the now $550 million "intellectual property protection", writing at Slate: "Instagram is a legitimately innovative company that's made something a lot of people like to use and do, in fact, use frequently. AOL is ... what? Not much, but they can provide Microsoft with much-needed countermeasures in the giant legal pretzel over who 'invented' smartphones and social networking."