Microsoft sells over half of its $1 billion AOL patent portfolio to Facebook

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Microsoft has signed a deal with Facebook to sell the social networking site $550 million worth of patents from the over $1 billion portfolio it recently acquired from AOL.

Facebook will get 650 patents and patent applications from Microsoft, and license the rights to use 275 other patents Microsoft is retaining in the deal, according to a report by Reuters. Microsoft will also retain the rights to use the patents it is selling to Facebook.

Microsoft bought the package of AOL patents, which cover technologies ranging from e-commerce to mobile devices and services to advertising, earlier this year in a deal that won out over competitive bids from Amazon and eBay.

Microsoft's general counsel Brad Smith, stated that the company's deal with Facebook enable it "to recoup over half of our costs while achieving our goals from the AOL auction."

The patents Microsoft acquired from AOL involved rights to inventions used by AOL's ICQ instant messaging and, in an odd twist of fate, the Netscape browser Microsoft worked hard to put out of business in the late 90s with its own Internet Explorer.

In 2007, Microsoft invested $240 million in Facebook, and the two companies have since partnered on Bing web search and Skype video chat since. The deal was viewed as a defensive measure by Facebook to protect itself from patent litigation by Yahoo (which Microsoft has also partnered with in web search since 2009).

Facebook already owns a portfolio of 56 patents and 503 applications of its own, along with 750 patents it acquired from IBM last month.

The strategic race to acquire patents has recently blossomed to involve every major tech company. Last summer, Microsoft partnered with Apple and RIM to buy up Nortel's wireless patents for $4.5 billion, followed by Google's deal to buy all of Motorola Mobility for $12.5 billion.