In a letter to the AOL Inc (AOL.N) board released on Tuesday, Starboard said that while it was pleased with the patent sale, it did not address "serious concerns" with the "poor operating performance" at AOL.

Starboard Value said in February it intended to nominate five members to AOL's board. Its potential nominees were Ronald Epstein, CEO of Epicenter IP Group; Steven Fink, former CEO of Larry Ellison's investments; Dennis Miller, a strategic adviser to Lionsgate; Jeffrey Smith, CEO of Starboard Value; and James Warner, principal of Third Floor Enterprises, an advisory firm specializing in digital marketing and media.

Starboard, which with a 5.3 percent stake in the Internet company is one of its largest shareholders, has been agitating for a shakeup. One of the paths it wanted AOL to pursue was an auction of its patents.

On Monday, AOL said it was selling the majority of its patents to Microsoft for $1 billion and that it would return a "significant portion" to shareholders.

Starboard said AOL should return all the proceeds to its shareholders.

A representative from AOL was not immediately available to comment.

"We remain concerned that shareholder capital will continue to be used for poorly conceived acquisitions and investments into money-losing initiatives," according to the letter.

Starboard singled out Patch, a group of community news websites, and AOL's splashy display ad business.

The investment fund said that it was planning to "promptly" file preliminary proxy materials for its board slate.

Shares of AOL, which jumped more than 40 percent on Monday after the patent sale announcement, closed down 6 percent at $24.82 on Tuesday on the New York Stock Exchange.

(Reporting by Jennifer Saba in New York and Sruthi Ramakrishnan in Bangalore, Editing by Lisa Von Ahn and Ed Davies)

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