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Facebook bought the entire Friendster portfolio of social networking patents earlier this year. The seven patents and eleven patent applications had been transferred to MOL Global when it bought Friendster for about $39.5 million late last year. Facebook then negotiated with MOL to buy the patents in a deal that included advertising, a partnership for payments for virtual goods, and cash, and was valued at $40 million, according to a source familiar with the matter. Record of the transfer, which occurred May 13, can be found here, and the awarded patents are accessible here. Facebook confirmed to VentureBeat that it had been assigned the patents.
The Friendster patents, which date back to the early days of social networking, are incredibly broad. They cover things like making connections on a social network, friend-of-a-friend connections through a social graph, and social media sharing. Friendster had received its first patent back in 2006, when it was already on the decline. At the time, Friendster President Kent Lindstrom told me the company had nearly forgotten it had ever applied for the patents, but added that “We’ll do what we can to protect our intellectual property.” From then on, Friendster frequently mentioned its patents as an asset, but to the best of our knowledge it never actually tried to enforce them.
At $40 million, the Friendster patents are one of Facebook’s largest acquisitions ever, on par with its FriendFeed deal. However, that money is trivial if there’s any chance MOL or someone else would have used the patents against Facebook. Especially with an IPO somewhere in its future, it was important that Facebook remove any shadow of a doubt that someone else had the rights to the intellectual property behind its core technology.
While MOL’s Friendster buy might not be the hottest property ever — the social network’s strongholds in Singapore, Malaysia, Indonesia and the Philippines are quickly being conquered by Facebook if they haven’t been already — the patent deal made MOL its cash back in the span of months.
It’s unlikely that Facebook would use the patents against other companies in the space rather than trying to out-compete them, though it now has the option to wield intellectual property as a weapon. There’s a historical reference for taking patents out of the market; the Six Degrees of Separation patent, obtained by the eponymous failed social networking startup, was bought at auction in 2003 by Reid Hoffman and Mark Pincus — in part to keep it away from Friendster, the market leader at the time.
Please see the disclosure about Facebook in my bio.