This just in: one chapter of AOL’s patent journey is coming to an end. The company is selling 800 patents to Microsoft for just north of $1 billion: $1.056 billion in cash to be exact.

Tim Armstrong, the CEO of AOL (which owns TechCrunch), says that the company will continue to hold on to about 300 patents and patent applications after the sale. These span “core and strategic technologies” around advertising, search and content generation, he noted in a memo to employees. [Full memo below the break.]

The sale to Microsoft came after a “competitive auction process” the company noted in a statement. It also includes the sale of the stock of an AOL subsidiary (unspecified which in the statement) “upon which AOL expects to record a capital loss for tax purposes and as a result, cash taxes in connection with the sale should be immaterial.”

AOL also said it “expects to utilize approximately $40 million of its existing deferred tax assets, representing approximately 20 percent of its total deferred tax assets, to offset any ordinary income taxes resulting from the license of its remaining patent portfolio.” We have reached out to try to get more specifics on the subsidiary and so licensee information for the remaining patents.

The sale is expected to be completed by the end of 2012.

The patent sale marks the end to a lot of speculation around what AOL would do with its patent trove. There had been pressure from shareholders, led by Starboard Value, to realize some of the value from those patents, starting last year, when investors began to grumble that the company was not focused enough on what it could be doing to make more money, and not monetizing fast enough on its growing media portfolio (of which TC is a part…).

The patents also came into question in March with the news that Yahoo was suing Facebook over several patent infringements.

Given that AOL’s portfolio also stretches into similar areas of social media and information organization, there were questions of whether AOL would also follow suit in a march to the courts — another route to realizing value from those patents.

The portfolio sold today patents related to advertising, search, content generation/management, social networking, mapping, multimedia/streaming and security, among other things. AOL has also received a perpetual license for all the patents as part of the deal, Armstrong said in his memo.

The sale not only neutralizes the possibility of AOL using those patents in a litigious way against Facebook (or others as the case may be), but it may also mean that Facebook is out of infringement hot water, as far as those patents are concerned: Microsoft became a shareholder in the company when it bought a 1.6 percent stake of Facebook back in 2007 for $240 million.

The question of what Microsoft intends to do with these patents is the next big question. Among the patents are several related to mobile and internet messaging (via AOL’s acquisition of ICQ). Others cover areas like location-based services and personalized content delivery. The most patents of all, however, come in the generic category of “online communications”, according to analysis from Envision IP.

The full memo: