Yahoo patent case against Facebook

Yahoo filed an infringement lawsuit against Facebook based upon 10 patents. Some of the patents have been around for a few years. What took them so long to make this claim?

Or is it just coincidence that Facebook is about to go public with huge IPO. Facebook filed for a $5 billion initial public offering which could be one of the largest technology IPOs ever.

Do you think Yahoo is thinking that a few shares of Facebook would be nice addition to their Stock portfolio?

The Yahoo complaint (PDF) lists 10 patents in which they argue Facebook has infringed. Barring a settlement it will be up to a jury to decide if the Yahoo claims are valid.

Yahoo released a statement that Yahoo has

“invested substantial resources in research and development through the years, which has resulted in numerous patented inventions of technology that other companies have licensed. These technologies are the foundation of our business that engages over 700 million monthly unique visitors and represent the spirit of innovation upon which Yahoo! is built. Unfortunately, the matter with Facebook remains unresolved, and we are compelled to seek redress in federal court. We are confident that we will prevail.”

Facebook and Yahoo have recently teamed to provide a SOCIAL BAR which allows Yahoo users to know what their Facebook friends are reading about on Yahoo.

Because of this new relationship Yahoo is benefited by the increased traffic to their website.

I remember when I was in law school and Prof. Fisher my Wills and Trust teacher said to us “money makes people funny”.

The learned professor meant that just because a bequest is to a family member don’t think that they’re not going to fight over the assets when the estate is settled.

Even though Yahoo and Facebook have recently been playing nice together, I guess Yahoo just wants a little bit more money. In response, Facebook has released a press release stating:

“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. Once again, we learned of Yahoo’s decision simultaneously with the media. We will defend ourselves vigorously against these puzzling actions.”

I was asked my opinion recently by reporter Rachelle Dragani of the E-Commerce Times about the case and wondered out loud “Is Yahoo a patent troll?”

What makes someone a patent troll?

I think patent trolls are nonpracticing entities (NPE) that file patent dubious patent infringement lawsuits for the sole purpose of squeezing money out of profitable businesses when there’s just a mere possibility that there’s an infringement. This seems obvious when there is no active business selling that product that needs protection. I guess if the complaint is valid and there is actual infringement taking place then the accuser is not a patent troll.

Even when there is no valid infringement the lawsuit takes a life of his own. Usually in these huge cases settlement is inevitable.This is so because it will cost more to fight and win than to just settle now.

I wonder if it’s a good idea to upset a giant like Facebook? Lawsuits like these often cost millions of dollars and if you’re suing somebody that has billions of dollars a few million dollars in a lawsuit isn’t such a big deal. Can the giant Facebook brush aside the smaller Yahoo?

Or will the fact that the IPO is pending and the risk factor that those billions of dollars can be lost to Yahoo become a big enough incentive for Facebook to settle? It will be interesting to see what happens. But I believe Yahoo is playing with fire.