text: SEATTLE — A plan by Facebook to acquire a broad range of patents through a deal with Microsoft is on its surface yet another twist in the battles over intellectual property engulfing the tech business. 
   
   But the subtext of the deal is a different story, showing how two of technology’s most powerful players are teaming up to create a greater balance of power on the Internet — a market that has been tilted decisively in favor of one company, Google, for years. 
   
   “This is almost certainly a move against Google,” said Rebecca Lieb, an analyst at Altimeter Group, a research firm. 
   
   The agreement between Microsoft and Facebook, announced on Monday, came less than two weeks after Microsoft agreed to pay more than $1 billion for 925 patents held by AOL. In a second deal, Microsoft said it had turned around and sold 70 percent of those same patents — about 650 in all — to Facebook for $550 million in cash, along with rights to 275 AOL patents Microsoft plans to retain. 
   
   While Facebook and Microsoft have not yet determined precisely how they are going to divvy up the patents, it is expected that Facebook will end up with a range of patents involving mobile, Web and instant messaging technologies. 
   
   Microsoft is likely to keep AOL patents involving search, among other things. 
   
   The arrangement will help Facebook bulk up its intellectual property portfolio before its initial public offering, which is expected next month, and it is a further sign of the growing importance of stockpiling patents in the arsenal of any big technology company. 
   
   “This is another significant step in our ongoing process of building an intellectual property portfolio to protect Facebook’s interests over the long term,” Ted Ullyot, general counsel of Facebook, said in a statement. 
   
   The deal could also give Facebook additional ammunition in its escalating patent feud with Yahoo. 
   
   Yahoo sued Facebook earlier this year, claiming violations of Yahoo patents, many related to online advertising. Facebook subsequently countersued Yahoo, in a pattern that is playing out again and again in different parts of the technology business, especially the mobile phone market. 
   
   But in large part the deal is evidence of how Microsoft and Facebook have gravitated ever closer to each other in part because of a common enemy, Google. 
   
   Google has menaced Microsoft’s business on a number of fronts, including with free online Google applications that compete with Microsoft Office and with Android, a mobile operating system that competes with Microsoft’s Windows Phone software. 
   
   As Facebook has evolved into a Web behemoth, with 900 million active monthly users, Google has become increasingly focused on tamping down the challenge to its business from the social network, introducing Google Plus, a rival social service. Google’s big concern is that the bounty of data Facebook has about its users, including their tastes and friend connections, will turn it into a serious rival for online advertising dollars. 
   
   There is also wide speculation that Facebook will start its own Internet search engine to rival Google. 
   
   “Microsoft is simply less concerned about the threat of social to its business than Google is,” said Michael Gartenberg, an analyst at Gartner, a research firm, explaining why Microsoft is not concerned about competition with Facebook. 
   
   “This may be a case of the enemy of my enemy is my friend,” he added. 
   
   Jim Prosser, a Google spokesman, declined to comment. 
   
   Microsoft has spent the last several years forging deeper connections with Facebook at every turn. Long stymied in its efforts to create an Internet search engine that effectively competed against Google, Microsoft two years ago struck a deal with Facebook to use data from the social network in Microsoft’s Bing search engine to create more relevant search results. But the arrangement has not helped dislodge Google from its position of supremacy in Internet search. 
   
   Years before that, Microsoft tried to acquire Facebook, but the social network’s chief executive, Mark Zuckerberg, rebuffed the offer. Those conversations subsequently led to Microsoft’s taking a small stake in Facebook, from which it stands to profit handsomely after the company goes public. 
   
   In March, Google accounted for 66.4 percent of Internet searches in the United States, unchanged from the same month a year earlier, while Microsoft was in second place with 15.3 percent of the market, according to comScore. 
   
   Microsoft’s Bing search engine also supplies search results for Yahoo, which accounted for 13.7 percent of the search market during March. 
   
   Microsoft has continued to lose money on Bing, including more than $2.6 billion in operating losses for its online division during its last fiscal year. 
   
   Some executives within Microsoft have advocated selling Bing to another company, with the idea that a company better focused on the Internet market could pose a more credible challenge to Google, according to severalpeople with knowledge of the discussions who didn’t want to be identified talking about internal deliberations. 
   
   Over a year ago, Microsoft executives sent out feelers to Facebook to see if the company would be interested in acquiring Bing, though the overture was not officially sanctioned by Steven A. Ballmer, chief executive of Microsoft, one of these people said. 
   
   Mr. Zuckerberg declined, saying Facebook had too much else to concentrate on. Dawn Beauparlant, a spokeswoman for Microsoft, declined to comment, as did Ashley Zandy, a spokeswoman for Facebook. 
   
   In its original patent deal with AOL, Microsoft either bought or won the ability to assign about 925 patents and patent applications, along with a license to several hundred other patents AOL did not sell as part of an auction of its intellectual property. 
   
   If the deal announced Monday clears regulatory scrutiny, Microsoft would still own about 275 AOL patents and retain a license to the 650 patents that Facebook will own. In addition, Microsoft is granting Facebook a license to the 275 AOL patents that it is keeping. 
   
   Yahoo’s legal attack on Facebook came at a sensitive time, as the company nears an expected initial public offering. 
   
   In a statement, Yahoo said the deal with Microsoft will not deter its lawsuit against Facebook. 
   
   “Nothing about today’s action changes the fact that Facebook continues to infringe our patents,” Yahoo said in the statement. “Companies who purchase patents are often working from a position of weakness and take these actions to strengthen their portfolio. We see today’s announcement as a validation of our case against Facebook.” 
   
   The deal with Facebook puts Microsoft in an awkward position since it could help strengthen one close partner at the expense of another, Yahoo. 
   
   “We are very sensitive to the importance of our relationship with both Facebook and Yahoo,” Brad Smith, Microsoft’s general counsel said in an interview. “We have enormous respect for the value of the Yahoo patent portfolio. Yahoo has been an important innovator in the Internet space.” ||||| Summary: Facebook is acquiring the majority of the patents Microsoft just acquired from AOL. Facebook will thus soon own over 1,000 patents. This deal is really all about another company: Yahoo. 
   
   Update - Yahoo: Facebook’s AOL patent deal with Microsoft show it is weak 
   
   As expected, Facebook and Microsoft today announced Menlo Park will pay Redmond $550 million for a portion of the 925 U.S. patents and patent applications it recently acquired from AOL for $1.056 billion. Microsoft will assign to Facebook the right to purchase 650 patents and patent applications of the total, plus a license to the AOL patents and applications that Microsoft will purchase and own. The news was broken by Bloomberg, which was subsequently followed by a press release sent out by both Facebook and Microsoft. 
   
   I say "as expected" because I wrote the following just a few days ago: 
   
   Here's the interesting part. Microsoft reportedly intends to sell most of the newly acquired portfolio because it doesn't consider all of the 800 patents valuable to its patent portfolio. In other words, Facebook could still get some of the patents it was after. After all, the two companies are more friends than enemies. 
   
   While the 800 estimate is no longer valid, everything else is. Microsoft will retain ownership of approximately 275 AOL patents and applications, a license to the approximately 650 AOL patents and applications that will now be owned by Facebook, and a license to approximately 300 patents that AOL did not sell in its auction. 
   
   Facebook will meanwhile get the 650 patents or so that it was after. Facebook will not, however, get a license to the 300 patents AOL still retains and which Microsoft has licensed. To license those 300 patents, Facebook will have to go directly to AOL. If it's interested, Facebook will do just that. 
   
   "Today's agreement with Microsoft represents an important acquisition for Facebook," Ted Ullyot, general counsel at Facebook, said in a statement. "This is another significant step in our ongoing process of building an intellectual property portfolio to protect Facebook's interests over the long term." 
   
   So, what does this mean? Well, first of all I can update the number of patents that Facebook will soon own to over 1,000. Late last month, I counted Facebook owned some 812 patents. With this Microsoft deal, Facebook has almost doubled that number. 
   
   More importantly though, these patents will likely end up being a big part of the social networking giant's current and future patent lawsuits. Facebook has been slowly looking to beef up its patent portfolio, but with public companies like Yahoo and Mitel targeting it for patent infringement, Menlo Park has stepped up its game. 
   
   I don't believe it's a coincidence that AOL and Yahoo are such similar companies. Both are/were online giants, and both have been superseded by Facebook. There is no doubt in my mind that this is exactly why Facebook is so interested in AOL's patents: a lot of them cover technologies that Facebook uses, and the rest likely cover technologies used by companies that want to sue or are already suing Facebook. 
   
   As such, I believe Facebook's lawyers are already going through the patents and deciding which ones will be most useful in helping the social networking giant fight back against patent trolls. This is the main reason Facebook is buying these patents from Microsoft. 
   
   Facebook's most recent patent purchase was some 750 patents from IBM. Soon Facebook will own 650 more AOL patents, and it's all thanks to Microsoft. 
   
   Speaking of which, in a post last month ("Should Microsoft save Facebook from Yahoo?) I said Microsoft would not directly help Facebook: 
   
   Microsoft and Yahoo have a patent sharing deal through their 2009 search agreement, which has been extended till 2013. There may not be anything legally stopping Microsoft from helping Facebook, but the software giant's partnership with Yahoo is no joke. Microsoft cares about growing Bing, and it needs Yahoo to fight Google. Of course it needs Facebook to fight Google as well, but somehow I don't think Microsoft wants to jeopardize either of its partnerships. Maybe Redmond will advise Menlo Park and Sunnyvale on what to do, but I don't think it will take action. Microsoft will probably just sit back and hope they'll work it out. 
   
   I was wrong. Only after Microsoft bought AOL's patents and the rumor about Facebook being interested in some of those patents, did I connect the dots. Microsoft found a very clever way to give Facebook a boost, while still getting what it wants (the remaining patents), without damaging its relationship with Yahoo. 
   
   Maybe I'm just stubborn, but I would still argue Microsoft is not "directly" helping Facebook. On the other hand, I'll be the first to admit that this is probably the best indirect help Facebook can get. 
   
   Since day one, I thought Yahoo suing Facebook was a stupid move and Sunnyvale should reconsider. Then Facebook countersued Yahoo. Now, more than ever, I think Sunnyvale should settle. 
   
   Update - Yahoo: Facebook’s AOL patent deal with Microsoft show it is weak 
   
   See also:
target: – Earlier this month, AOL agreed to sell Microsoft 925 patents and patent applications for just north of $1 billion; now another tech giant is getting a piece of the action. Facebook has pledged to buy some 650 of those patents, or $550 million worth. In the deal, Facebook also gets a license to Microsoft's portion of the portfolio. According to Facebook's announcement, Microsoft ends up with 275 AOL patents, plus licenses to Facebook's AOL patents and the 300-ish patents AOL didn't sell. "Today’s agreement with Facebook enables us to recoup over half of our costs while achieving our goals from the AOL auction," says a Microsoft rep. For Facebook, it's "another significant step in our ongoing process of building an intellectual property portfolio to protect Facebook’s interests over the long term," says a spokesman. What do outsiders say? "The deal is a further sign of the growing importance of stockpiling patents in the arsenal of any big technology company," writes Nick Wingfield for the New York Times. "It also shows how Microsoft and Facebook have gravitated increasingly closer to each other in large part because of a common enemy: Google." Writing for ZDNet, Emil Protalinski says it's actually all about Yahoo, not Google. "With public companies like Yahoo targeting it for patent infringement, the social networking giant has stepped up its game. I don’t believe it’s a coincidence that AOL and Yahoo are such similar companies. This is exactly why Facebook is so interested in AOL’s patents: a lot of them cover technologies that Facebook uses, as well technologies used by companies that want to sue Facebook."