Yahoo Patent Lawsuit: Unfortunate Pre-IPO Timing for Facebook

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yahoo patent lawsuit facebookWith Facebook on the verge of a record-setting technology IPO, Yahoo has filed a patent infringement lawsuit that argues the social network has inappropriately used technology in a way that infringes on ten of Yahoo’s patents. The lawsuit, which was filed on Monday in a California federal court, comes at a time when investors are carefully scrutinizing Facebook’s assets and potential liabilities. Yahoo’s aggressive new CEO is undoubtedly hoping that Facebook will want to settle this matter quickly ahead of the IPO.

Prior to Google’s IPO in 2004, Yahoo filed a lawsuit that stated Google had infringed on patents related to pay-per-click and advertising bidding and ranking systems. The two companies reached a settlement two weeks before the IPO that gave Yahoo 2.7 million shares of Google stock worth approximately $290 million. In addition, Google eventually agreed to license several of Yahoo’s patents.

A spokesperson for Facebook issued the following statement regarding Yahoo’s lawsuit:

“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.”

While Facebook is planning to defend the lawsuit, the Yahoo spokesman indicated confidence in his company’s case:

“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.”

In the past, Facebook and Yahoo were business partners in a mutually beneficial relationship. However, the lawsuit places that business relationship in jeopardy and will likely impact investors’ view of Facebook as an investment. The lawsuit claims that Facebook has misused technology related to advertising, social networking, communications, privacy, and programming.

[Sources Include: CNET & Venture Beat]

David Angotti

David Angotti

After successfully founding and exiting an educational startup in 2009, I began helping companies with business development, search engine marketing (SEM), search engine optimization (SEO),... Read Full Bio
David Angotti
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  • one giant media

    Haha, Yahoo! is so stupid, but smart with their timing. They’re looking to make a profit like true opportunists – sleeeazy. They’re probably confident they will prevail only because the timing of this is such that facebook would rather pay them to shut up and not F up their IPO than wrestle through court risking any bad PR, even though Y has no case for intellectual property or patents. I’m curious what patents they’ve infringed on? Yahoo is really nothing like facebook, so what are they suing them for copying? Inbox? Ads? Servers? Community? The Exclamation Point? Are they going to sue every website on the internet next? They would never win this suit, but it will be interesting with timing to see how much Facebook will settle with them for to not F up their MULTI BILLION dollar IPO… If Facebook was smart and the timing was different, they’d blow this up in the media to show how slimy Yahoo is being and gain a lot of empathy and free advertising in the news, but their board will probably just say settle out of court and move on with the IPO… a mil or two should do the trick.

  • Derek

    Of course, this is America and when your business is failing, you can always sue someone to get a big payday.

    Good timing on Yahoo’s part because Facebook i think will settle this like Google had did with a large deposit of cash. Facebook should never do business with Yahoo again and turn around and buy Yahoo. LOL

    Wouldn’t that be funny if that actually happened. Yahoo isn’t number 2 search engine no more and will do anything to keep there business in the profit margin with the new boss running the company.

  • Pat Testing

    Great timing from Yahoo, it seems all the large it companies are filing suits against each other as part of their day to day business, it must keep their lawyers laughing all the way to the bank.