Facebook Sued by Yahoo
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It is apparently the season of patent infringement lawsuits. Yahoo (NASDAQ: YHOO) has followed through on its prior threat to sue social media giant and partner Facebook over several patents that Yahoo insists Facebook should license. According to the filing there are 10 patents that are related to privacy, advertising, customization, messaging, and social networking.
Although, Facebook feels “puzzled” by Yahoo’s aggressive stance on this issue, they are not the first to experience this type of agreement this year; Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), and Motorola Mobility Holdings (NYSE: MMI) are all currently involved in patent infringement suits.
In January 2012 Motorola Mobility filed a patent infringement suit against Apple regarding technology associated with the iPhone 4s and the iCloud remote storage service; specifically, technologies related to messaging, software, date filtering, and wireless antennae. Apple went before the legal firing squad again earlier this month and is also being sued for patent infringement by Core Wireless Licensing, a company that Microsoft hold interests in. Core Wireless is claiming infringement on eight patents related to the 2G, 3G, and 4G protocols used in most iPhones and iPads.
Motorola had also been in a long time patent infringement suit with Alcatel Lucent (aka Lucent Technologies, Inc) regarding MP3 audio compression technology and other technologies needed for the Media Player software. That suit was recently dismissed after long court battles.
“We are disappointed that Yahoo, a longtime business partner of Facebook and a company that has substantially benefitted from its association with Facebook, has decided to resort to litigation,” Facebook released in a statement.
While Yahoo defends its lawsuit claiming to have invested considerable resources in development and research, the lawsuit itself could highlight some of Facebook’s vulnerabilities; especially in light of Facebook’s IPO.
Patent infringement suits are not uncommon but they usually involve “patent collectors”; companies that buy up patents for the sole purpose of making a profit from licensing. Tech companies have long gathered massive amounts of patents in development of their businesses but as a rule do not tend to step on each other's toes. Yahoo’s position is regarded as some as a way to generate a large chunk of income in the face of revenue losses over the past three years.
In 2004 Yahoo successfully walked away from a patent settlement with Google just days before their IPO. The settlement netted Yahoo hundreds of millions.
Regardless, whether Yahoo was kind enough to “lend” Facebook the use of the disputed patents over time or whether Facebook did in fact take advantage of the business arrangement and did not license the patents, it is entirely up to the courts to decide.
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