Yahoo Demands Facebook to Pay for Its Patents or Get Sued

NEW YORK | Tuesday, February 28th, 2012 4:59am EDT

Yahoo is threatening action unless Facebook licenses some of its technologies, as other web and technology companies are said to have done.

Yahoo Demands Facebook to Pay for Its Patents or Get Sued 01

After years of positive relations, friendly blog posts, and referral traffic, Yahoo may have just been biding its time waiting to declare war on Facebook. Today it suddenly accused its former ally of infringing on 10-20 of its patents. Photo: Satyendra Kumar/Flickr

Yahoo has demanded licensing fees from Facebook for use of its technology, the companies said on Monday, potentially engulfing social media in the patent battles and lawsuits raging across much of the tech sector, reports Reuters.

Yahoo has asserted claims on patents that include the technical mechanisms in the Facebook’s ads, privacy controls, news feed and messaging service, according to a source briefed on the matter.

The move by Yahoo puts it in conflict with Facebook with which the company has a beneficial relationship, particularly in the area of integration of Yahoo News with Facebook.

PC World informs that traffic to the mobile Yahoo News web app from Facebook Mobile has increased three-and-a-half times since Feb. 14 to 1.6 million visitors a day, according to a post last week on Facebook’s developer blog.

Representatives from the two companies met on Monday and the talks involved 10 to 20 of Yahoo’s patents, said the source, who was not aware of what specific dollar demands Yahoo may have made for licenses.

In an e-mailed statement, Yahoo said, “Yahoo! has a responsibility to its shareholders, employees and other stakeholders to protect its intellectual property. We have invested substantial resources into these innovations.”

“Recognizing that, other major web and technology companies have already licensed some of these technologies. We must insist that Facebook either enter into a licensing agreement or we will be compelled to move forward unilaterally to protect our rights.”

Yahoo has long worked closely with Facebook, using the social network to power sign-up and login of its email service and Flickr.

According to Tech Crunch, just 11 days ago, Facebook congratulated Yahoo in a blog post noting its Open Graph protocol had helped Yahoo’s news reader app gain 25 million users, including 2 million each day, and more than 500,000 referrals a day.

Today’s attack comes at a particularly vulnerable time for Facebook, during the quiet period leading up to its IPO. Facebook could be forced to license the patents or settle with Yahoo by paying out pre-IPO stock, the same way Google was coerced into giving Yahoo 2.7 million shares in a patent settlement before the search giant’s 2004 IPO.

A Facebook spokesman said: “Yahoo contacted us at the same time they called the New York Times and so we haven’t had the opportunity to fully evaluate their claims.”

Should Yahoo wind up suing Facebook, it would mark the first major legal battle among technology giants in the social media sphere and a major escalation of patent litigation that has already swept up the smartphone and tablet sectors and high-tech stalwarts such as Apple Inc, Microsoft Corp and Motorola Mobility.

Once a leading Internet company, Yahoo now finds itself trailing behind newer entrants like Google and Facebook.

The company recently witnessed the exit of key people including co-founder Jerry Yang, and chairman Roy Bostock who said in February that he would not stand for re-election, amidst unconfirmed reports that company may be up for sale.

Yahoo has held these patents defensively for years as a deterrent to trolling by other patent holders. But Facebook is a young company without a robust portfolio, and with record buzz about its IPO, now might be the perfect time to shake down the social network.

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