Microsoft is to acquire most of AOL's patents in a deal worth $1.06bn that covers more than 800 technological innovations.
Microsoft will also be granted licensing rights to about 300 patents that will be retained by AOL, according to the BBC.
As patent wars become increasingly common in the technology market, companies are seeking to strengthen their position by acquiring as many patents and licences as they can.
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Several big companies, including Intel, Google and Facebook, have already acquired a large number of patents this year.
Google, for example, is in the process of buying Motorola Mobility in a $12.5bn deal that includes more than 17,000 patents.
AOL said the agreement with Microsoft was the result of a "robust auction process" and that a "significant portion" of the proceeds would be passed on to its shareholders.
In early April, Facebook announced that it was counter-suing Yahoo in an escalating patent battle between the rival internet firms. Facebook claimed Yahoo violated its patents covering photo tagging, advertising and online recommendations.
The counter-lawsuit indicated that although Facebook has relatively few patents, the social networking firm believed it had been able to file or buy enough intellectual property to retaliate against an attack from a more established player such as Yahoo, according to observers.
In March, Yahoo sued Facebook, accusing it of infringing 10 of Yahoo's patents, including systems and methods for advertising on the web.
Patents are becoming the new battlefield for technology firms, with many seeking to gain as many device-specific patents and patents around forward-thinking ideas as possible.
So-called "blue-sky patents" consider what next-generation products and services may look like, in an attempt to secure a dominant position in the future.
In March, for example, the US granted Google a patent on technology designed to enable targeted advertising based on a smartphone user’s environment.
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