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Microsoft and Facebook concluded a significant round of pass the patent parcel today as the soon-to-IPO social network gained rights to a bundle of IP formerly belonging to AOL.

The companies have carved up the $1bn patent pile that Microsoft secured from AOL earlier this month, strengthening both their respective IP positions and the comparatively low-profile alliance bewteen the veteran biz software giant and the social networking behemoth.

Facebook will cough up $550m in cash for 650 AOL patents and patent apps, plus a license for AOL patents and applications that Microsoft will purchase and own. Microsoft will hang onto 275 AOL patents and apps, a license to the 650 that Facebook will own, and a license for the 300 odd patents that AOL did not sell.

"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 and general counsel at Microsoft. "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 comes just weeks after AOL and Microsoft struck the original $1bn patent peacemaker. At the time, an analysis showed AOL had some hefty IP dating from the beginning of the internet era, covering IM, email, patents covering browsing and search. Almost 5 per cent covered social networking.

"This is another significant step in our ongoing process of building an intellectual property portfolio to protect Facebook’s interests over the long term," said Ted Ullyot, general counsel of Facebook.

Facebook is a relative newcomer to the patent wars. However, it bought a raft of IBM IP recently, and is already involved in a spat with Yahoo!, and as it gets richer it will no doubt attract the attention of ever more patent lawyers - whether at rival big firms or just out and out trolls.

This could be expected to become even more of a problem once its coffers are swollen with lovely post-IPO cash, which it might be tempted to bleed out making problems just go away. So a locker full of IP of its own gives it something to play with.

For its part, Microsoft boosts its treasured IP hoard, and by playing pass the parcel with Facebook makes the upstart a bigger problem for other firms that they might have have their own own problems with. It helps Microsoft also has its own financial stake in Facebook too.

Whether the relationship could go any deeper is open to question. But one could even get all misty eyed and look at the deal as a grizzled old veteran giving a steer to the youthful, if cocky, upstart. Like Dreyfuss and Estevez in Stakeout, Eastwood and Sheen in The Rookie, or Time Warner and AOL a dozen or so years ago. And look how well that worked out. ®

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