New York-based AOL Inc. said it plans to return some of the sale proceeds to its shareholders.
The company's shares jumped $6.46, or 35 percent, to $24.77 in premarket trading. Microsoft shares slipped 22 cents to $31.30.
After the sale, AOL said it will still hold over 300 patents and applications covering a variety of core and strategic technologies including advertising, search, content generation, social networking, mapping, multimedia, and security among others.
AOL also received a license to the patents being sold to Redmond, Wash.-based Microsoft Corp.
Tim Armstrong, AOL's chairman and chief executive, said the deal with Microsoft resulted from a "robust" auction of the company's patents. He said the company's license agreement with Microsoft shows that it still holds a valuable patent portfolio.
"The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value," Amstrong said in a statement.
AOL said it will determine the best way to distribute a "significant portion" of the sale proceeds to shareholders before the sale closes, which is expected to happen by the end of this year.