The patent war is fierce and many companies have decided to extend their patent portfolios by buying patents from others. Microsoft will be doing just that in a deal with AOL.
They'll be buying 800 patents from AOL, who will be left holding 300 more. As part of the deal, Microsoft will also get a non-exclusive license for those remaining patents. The bill will be just over $1 billion for the whole thing.
Microsoft didn’t just jump into this deal - they've been following AOL's portfolio for years and spent several months to study it in detail.
The purchase had a really positive effect on the AOL stock, which jumped 37% - from the $18.42 it closed on Friday to $25.16.
The deal should be finalized by the end of this year and a big chunk of the cash is expected to go to shareholders. Should the deal fail, Microsoft will have to cough up $211.2 million to AOL.
An AOL unit will also be sold as part of the deal and recorded as a capital loss (it's a tax thing).