AOL has reached a $1 billion deal to sell and license patents to Microsoft -- another in a series of "Antiques Roadshow" moments in the technology world. Faded companies have been rummaging through their assets recently, and some of them have found musty old patents that turn out to be worth a great deal.
Patents have become a hot commodity in recent years. They give the holder the exclusive right to use certain technologies or business processes in the United States. Companies such as Microsoft, Apple, Facebook and Google are collecting large patent libraries and increasingly using them in lawsuits -- to defend their businesses or to attack rivals.
A valuable patent is less like a forgotten Rembrandt and more like a rusty-but-serviceable gun.
"Patents have become legal weapons. They're not representing ideas anymore," said James Bessen, a Boston University lecturer and director of a nonprofit that studies patent issues.
Two big deals in the past year have pushed patents into the spotlight.
In July, a consortium that included Apple Inc. and Microsoft Corp. pledged to pay $4.5 billion for a collection of patents from Nortel Networks, a bankrupt Canadian maker of telecommunications equipment. By contrast, Nortel's once-prominent wireless networks business fetched just $1.13 billion in 2009.
The consortium outbid Google Inc. for the Nortel patents. But Google struck back in August, when it sealed a deal to buy cellphone company Motorola Mobility Holdings Inc. for $12.5 billion. Motorola is well past its prime as a cellphone maker, but as a technology front-runner for decades, its engineers had accumulated 17,500 patents for the company. The deal with Google has yet to close.
Google wants Motorola's patents as a defense against lawsuits related to its Android operating software for phones and tablets. Motorola, Samsung Electronics Co. and other phone makers have been riding Apple's coattails with devices that are similar to Apple's iPhone and iPad. Apple is fighting back, using patent law in an attempt to delay competitors.
Google supplies Motorola and Samsung with phone software, so it doesn't want to see Apple succeed with its lawsuits. It's buying Motorola so it can use its patents to sue Apple, a threat that could force Apple to the negotiating table or avoid suing Google's partners altogether.
Because of their complexity, high-tech products are particularly susceptible to patent litigation. Hundreds of thousands of patents could apply to a smartphone, for instance. A competitor sitting on any one of those patents could ask a court to stop sales of the product. Things rarely get that far, however. Instead, the defendant usually ends up paying the patent owner ongoing royalties.
Eastman Kodak Co. started shopping around its digital-imaging patents last summer but didn't manage to make a sale in time to avoid a bankruptcy filing. It's now set to sell them under the bankruptcy proceedings.
Kodak created some of the first digital cameras. Cameras now go into every phone, and Kodak's patents could be worth $2 billion to $3 billion, according to various estimates. Last fall, investors valued Kodak at just over $1 billion, including its debts.