Why Microsoft spent $1 billion on AOL's patents

While it's possible that other companies might have bid against Microsoft, the data from MDB suggests that Microsoft was willing to pay as much as it did because the AOL patents had more strategic importance to it. So Microsoft both wanted the patents, and it wanted to make sure rivals didn't get them.

"Microsoft probably believed that Google would have been interested," said Erin-Michael Gill, MDB's managing director and chief intellectual property officer.

Moreover, the average age of the patents in the AOL portfolio, which also includes some patents that AOL did not sell to Microsoft, is about four years old. That suggests that many of the patents have yet to be licensed to other companies, something that makes that intellectual property more valuable.

"The amount Microsoft paid implies that there are very few encumbrances on the portfolio," Gill said.

That increases the value of the portfolio, giving Microsoft more opportunities to license the patents in order to recoup its investment--and Microsoft has an active, aggressive licensing program. Of course, it also gives Microsoft another weapon in its patent battles over Google's Android and Chrome operating systems. The company has already struck deals with several device makers -- including HTC and LG -- to license its technology to continue to use Android and Chrome and avoid litigation. And its sued companies that haven't agreed to licensing terms, including Barnes & Noble and Motorola.

The new AOL deal should give Microsoft more munitions for their intellectual property battles with Google.

"There is a whole host of products that Microsoft will want to increase their leverage over Google with," Gill said. "This should allow Microsoft to operate as something of a gatekeeper."

Another take on why Microsoft bought AOL patents. It made sense.