So it is that Facebook is again putting its very deep pockets to work, adding a new clutch of patents from Microsoft to an earlier trove it acquired from IBM. The message to Yahoo and beyond is clear: Do you want to get into a spending war with a company whose deep pockets are about to get a lot deeper? In other words, there's a lot more where that came from.
All this marks a rapid turnaround for Facebook. The announcement earlier today that Facebook would spend $550 million to buy patents held by Microsoft was the second big patent purchase by the social networking company in as many months.
At the end of 2011, Facebook had only 56 U.S. patents. But it received the proverbial wake-up call when Yahoo sued the company, claiming that Facebook infringed upon several of its patents. Rejecting the allegations, Facebook has since countersued.
Then in March, Facebook acquired about 750 patents held by IBM, covering software and networking, for an undisclosed sum. And now this agreement to purchase a portion of the patent portfolio Microsoft recently agreed to acquire from AOL. As of today, the company is estimated to have 775 granted U.S. patents and approximately 100 pending U.S. applications, according to Erin-Michael Gill, a managing director and chief intellectual property officer at MDB Capital Group.
"Facebook investors should be thanking Yahoo," said Gill, adding that "Facebook is starting to focus on IP in a big way."
For the record, Facebook isn't saying anything beyond its official press release announcing the deal with Microsoft. But insiders acknowledge the obvious motivation: Facebook's working quickly to bulk up its intellectual property portfolio in advance of its initial public offering, taking another preemptive move to dissuade any patent trolls thinking about filing a Yahoo-like lawsuit out of the blue.
All told, Facebook likely spent nearly $1 billion on IP acquisitions to fundamentally address its issues with Yahoo, which remain unresolved, according to Gill.
"Their first acquisition (from IBM) appears to be encumbered -- meaning that real leverage won't come until existing licenses to Yahoo expire. This portfolio is presumed to have not been licensed to Yahoo, and so would have more immediate value in settlement negotiations," he said.
One side issue to come out of today's news: Microsoft now risks getting involved in that Facebook-Yahoo snit. In October 2007, Microsoft paid $240 million in return for approximately 1.6 percent of Facebook. As part of that deal, which broadened an earlier marketing arrangement, Microsoft would help sell Internet ads for Facebook. At the time, the Facebook arrangement was seen as a way for Microsoft to counter Google's increasing clout in the online advertising market.