Microsoft has agreed to purchase a cache of 800 patents from internet pioneer AOL for $1.06 billion and has obtained licences on 300 more, an announcement said Monday.
The purchase is expected to improve Microsoft's firepower in a worldwide legal war over patents among leading technology companies.
AOL shares rose 31 percent in early trading in New York after the patent pact was announced. Microsoft, which is to pay cash, saw its stock fall 1 percent.
"This is a valuable portfolio that we have been following for years and analysing in detail for several months," said Brad Smith, chief legal officer at Microsoft.
Technology companies have been accusing one another in the courts of breaching one another's patents to mobile computing ideas, with the key legal fights before German courts.
Commentators say the best antidote is for each company to have a stock of important patents of its own to scare off potential attackers and so it can negotiate balanced settlements.
Google's takeover of patent-rich US company Motorola Mobility for $12.5 billion, recently cleared by key regulators, is seen as motivated by the same need.
Motorola and AOL were both pioneers, Motorola in making mobile phones and AOL in marketing internet use.
AOL will continue to own 300 of the patents, with Microsoft merely a licensee.
Tim Armstrong, AOL chief executive, said, "we continue to hold a valuable patent portfolio as highlighted by the licence we entered into with Microsoft. The combined sale and licensing arrangement unlocks current dollar value for our shareholders."
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