The news that Facebook has acquired and licensed the patents Microsoft recently acquired from AOL comes at the same time Facebook added this sentence to its prospective IPO prospectus:
"In addition, in the future we may acquire additional patents or patent portfolios, which could require significant cash expenditures."
That's from a risk factor on page 20 of Amendment No. 4 to Facebook's Registration Statement on Form S-1, filed yesterday with the SEC.
The amended prospective prospectus also illustrates the "MAD" or "mutually assured destruction" doctrine of "defense" that was successfully surfaced in the comment threads to earlier posts here and on GeekWire about Twitter's new "defensive only" stance toward patents.
Updating prior disclosure about the patent infringement suit brought by Yahoo, Facebook now says it will fight back, not simply by vigorously contesting Yahoo's claims, but by asserting counterclaims - that is, by bringing other patents into the mix, patents owned or controlled by Facebook, and asserting that Yahoo has infringed those different patents of Facebook. In other words, Facebook will escalate the hostilities. Here's a detail from the redline I ran against Amendment No. 3:
Also of interest in Facebook's amended disclosure: concise, but seemingly precise, summaries of both the Instagram deal and the deal with Microsoft regarding the AOL patents. These two paragraphs are back-to-back on page 65 of Amendment No. 4:
"In April 2012, we entered into an agreement to acquire Instagram, Inc., which has built a mobile phone-based photo-sharing service, for approximately 23 million shares of our common stock and $300 million in cash. Following the closing of this acquisition, we plan to maintain Instagram's products as independent mobile applications to enhance our photos product offerings and to enable users to increase their levels of mobile engagement and photo sharing. This acquisition is subject to customary closing conditions, including the expiration or early termination of all applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (HSR), and is currently expected to close in the second quarter of 2012. We have agreed to pay Instagram a $200 million termination fee if governmental authorities permanently enjoin or otherwise prevent the completion of the merger or if either party terminates the agreement after December 10, 2012.
"Also, in April 2012, we entered into an agreement with Microsoft Corporation pursuant to which we will be assigned Microsoft's rights to acquire approximately 650 patents and patent applications that are subject to the agreement between AOL Inc. and Microsoft entered into on April 5, 2012, in exchange for a total cash payment of approximately $550 million. As part of this transaction, we will obtain a license to the other AOL patents and patent applications being purchased by Microsoft and will grant Microsoft a license to the AOL patents and patent applications that we acquire. In addition, we will be assigned Microsoft's rights to acquire the outstanding shares of a wholly-owned, non-operating subsidiary of AOL that holds a portion of the aforementioned patents and patent applications. The transaction is subject to the closing of Microsoft's transaction with AOL as well as customary closing conditions, including the expiration or early termination of all applicable waiting periods under HSR."
Pictured: Facebook's Seattle office (behind the light pole) this morning.