Yahoo! Files Lawsuit Against Facebook

On March 12, Yahoo! filed a lawsuit against Facebook based on Facebook’s infringement of ten Yahoo! owned patents and refusal to license them, Yahoo! had previously begun licensing negotiations with Facebook on February 28. Facebook expressed surprise and dismay, as the two companies had previously had a good relationship, with Yahoo! heavily integrating Facebook into its services.

The lawsuit has been attributed to the fact that Facebook recently filed for an IPO. A drawn out lawsuit at this point in the process could be harmful for the company’s stock price, meaning that its easiest plan of action would be to award Yahoo! the requested damages. Yahoo! used similar tactics in 2004, when it threatened Google with a lawsuit just prior to its IPO and was subsequently given 2.7 million shares of Google stock in settlement.

The patents on which the case are based have themselves come under fire for their exceptionally broad nature, a complaint common for software patents, and Yahoo! has come under fire for it. Wired writer and former Yahoo! employee Andrew Baio expressed disgust towards the company’s usage of their patents, as he, along with his fellow employees, had been informed they were applying for the patents so as to ward of “patent trolls”– individuals or companies who deliberately apply for patents covering an already existent technology in an effort to extract licensing fees from companies who are using the technology but have neglected to patent it. Baio angrily protested Yahoo!’s “weaponization” of his patents, reflecting the sentiments of many other writers.

Yahoo!’s patents include US Patent No. 5,983,227, which allows for customizable user pages, US Patent 7,406,501, which allows instant messages to be sent to email addresses, and US Patent No. 7,747,648, which covers the idea of having web pages for things which also provide a means for people to interact with the people maintaining the web page, which would cover most, if not all, social networks, Facebook included. These were filed in 1997, 2003, and 2005 and issued in 1999, 2008, and 2010, respectively. For reference, Facebook was founded in 2004, and one of the earliest dedicated social networking sites, SixDegrees.com, was founded in 1997.

Facebook has responded to the suit by purchasing 750 patents from IBM, more than doubling the company’s patent portfolio, and filing a countersuit accusing Yahoo! of violating Facebook’s patents.