Good article from Doug French at Mises Daily:

From Innovation to Rent Seeking

Mises Daily: Wednesday, April 18, 2012 by Doug French

It’s often thought that the technology sector is the least regulated and therefore has been the most productive during the past couple of decades. Famously, Bill Gates had no interest in politics. “In the beginning, Microsoft tried to ignore the powerful political forces arrayed against it, hunkering down in Redmond, Washington, to focus on its core businesses,” William F. Shugart wrote in the Freeman. Of course, the Department of Justice snapped Mr. Gates to attention.

And while Mark Zuckerberg says he doesn’t like to vote, since hiring Sheryl Sandberg, who served in the Clinton administration, Facebook’s DC presence has increased, and President Obama himself stopped by the FB office.

The news of AOL’s patent sale to Microsoft reminds us that there is plenty of government force channeling money toward the coffers of the big tech companies. It’s not all warm and fuzzy corporate slogans, cool workplaces, and upscale company cafeterias in Silicon Valley.

Battalions of intellectual-property (IP) lawyers keep constant watch over the government-erected barriers and monopoly privileges that lock up ideas and create corporate value out of thin air.

AOL is considered so old school, kids snicker if they see someone with an aol.com email address. In 2001, old-school media giant Time Warner consolidated with American Online (AOL), the Internet and email provider of the people, for a whopping $111 billion. However, eight years later, the CEO of Time Warner, Jeff Bewkes, announced that the marriage of AOL and Time Warner was dissolved.

Last year, AOL bought the Huffington Post for $315 million or reportedly five times revenues: the multiple to profits being unknown, as there were none.

But Microsoft had $1 billion burning a hole in its pocket, and AOL had 800 patents it didn’t need; a deal was made, and AOL shareholders loved it. However, this is no aberration. Steve Lohr writes for the New York Times,

The lofty price — $1.3 million a patent — reflects the crucial role that patents are increasingly playing in the business and legal strategies of the world’s major technology companies, including Microsoft, Apple, Google, Samsung and HTC.

Patents that can be applied to both smartphones and tablet computers, which use much the same technology, are valued assets and feared weapons, as the market for those devices booms. Companies are battling in the marketplace and in courtrooms around the world, where patent claims and counterclaims are filed almost daily.

The AOL-Microsoft deal is just a continuation of the red-hot patent market. Last April, Novell sold 880 patents to a consortium of companies, including Microsoft and Apple, for $450 million.

Two months later Apple, RIM, Sony, and others bought 6,000 patents from Nortel Networks for $4.5 billion.

Last August, Google paid $12.5 billion for Motorola Mobility and its 17,000 patents.

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