Yahoo Sues Facebook For Patent Infringement

Yahoo Inc sued Facebook Inc over 10 patents, including methods and systems for advertising on the Web.

The lawsuit initiated by Yahoo's new chief executive, Scott Thompson, came as Facebook moves toward an initial public offering of stock this year that could value the company at $100 billion. Photo: Yahoo! Blog/Flickr

The lawsuit that Yahoo Inc filed in a San Jose, California federal court on Monday, marks 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 Holdings Inc, informs Reuters.

The lawsuit comes as Facebook moves toward an initial public offering of stock this year that could value the company at $100 billion.

“Unfortunately, the matter with Facebook remains unresolved and we are compelled to seek redress in federal court. We are confident that we will prevail,” Yahoo said in a statement.

As notices The Wall Street Journal, Yahoo is not actually famous for aggressively defending its intellectual property.

In fact the company settled a patent dispute  against Google Inc. before the search giant filed for an IPO in 2004. To solve the matter, that involved online-advertising patents  acquired by Yahoo when it bought a company called Overture, Google gave Yahoo shares valued at more than $300 million.

Yahoo’s suit against Facebook also makes references to Overture ad patents.

Facebook spokesman Jonathan Thaw said that the company learned about the lawsuit through the media.

“We’re disappointed that Yahoo, a longtime business partner of Facebook and a company that has substantially benefited from its association with Facebook, has decided to resort to litigation,” Thaw said.

Yahoo has seen its profit declining in recent years. Meanwhile, its rivals such as Facebook and Google have thrived.

In January, Yahoo appointed Scott Thompson,  former PayPal President, as its new chief executive, replacing Carol Bartz, who was fired in September.

Just two of the 10 patents issued are directly connected with social networking technology.

The majority of issues focus on online advertising, such as methods for preventing “click fraud,” as well as privacy and technology for customizing the information users see on a Web page.

Another patent cited by Yahoo is related to a method for people to communicate through a virtual entity, “enabling users to easily share their experiences,” according to patent filings.

According to some legal experts,  Yahoo’s decision to sue is connected with the company’s recent business struggles and the new strategies of Mr. Thompson, who has announced that the company needs to explore ways to profit from new and underutilized parts of its business.

Yahoo did not specify whether it is going to bring patent claims against other social networking companies.

Yahoo says in the lawsuit that Facebook was considered “one of the worst performing sites for advertising” prior to adapting Yahoo’s ideas.

“Mr. Mark Zuckerberg, Facebook’s founder and CEO, has conceded that the design of Facebook is not novel and is based on the ideas of others,” Yahoo lawsuit says.

Michael Barclay, a volunteer lawyer at the Electronic Frontier Foundation, commented on the suit: “It’s common for older companies whose businesses aren’t doing as well as they’d like to file suits like this” against newcomers that plan to go public.

Companies targeted with patent claims usually defend themselves by threatening a countersuit using its own patents. But for Facebook it’s not an option, as Yahoo possesses far more patents than Facebook.

According to a U.S. government database, Yahoo has over 3,300 patents and published patent applications, while Facebook has only 160.

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