post Tuesday April 3, 2012
Last month, Yahoo!, Inc. filed a lawsuit against Facebook, Inc. alleging that Facebook infringed 10 of its patents, and now Facebook seems primed to fight back. As Yahoo is hitting Facebook with these infringement allegations right after the social media giant announced a $5 billion IPO (which values Facebook near $75 billion), questions have been raised as to whether Yahoo is only undertaking legal action to prop up its own declining stock value. The way this infringement case is setting itself up, it is possible that the reward to Yahoo and the damage to Facebook could be in the billions of dollars.
The patents in question focus on processes such as adaptive advertisements, social networking, messaging, the personalization of websites, and privacy tools. One of Yahoo’s patents in particular allows for customized content feeds – a process that Facebook relies on heavily for its newsfeed to function. But even though it is clear that Faecbook does use these features on its website, you can hardly find a popular social networking site that does not (both Google+ and Twitter use these same features), so does Yahoo intend to go after all of these sites as soon as they announce an IPO? [Source: American University Intellectual Property Brief]
In the company’s statement, Yahoo said that it has “a responsibility to its shareholders, employees, and other stakeholders to protect its intellectual property.” Yahoo’s aim in the beginning was for Facebook to pay the search engine licensing fees for the use of these patents. Yahoo added in its statements to Facebook and the New York Times, that several other web technology companies already pay license fees to Yahoo for the use of some of these patents. But Facebook is clearly not giving up so easily. [Source: International Business Times]
Facebook seems to have two options in fighting the infringement allegations. The first course of action is to claim that Yahoo’s patents are invalid on the basis that they are too obvious or not novel (that these processes have been used before Yahoo patented them). To prove this, Facebook will need to show that there is prior art for each of Yahoo’s claims which would invalidate Yahoo’s patents. A second course of action would be for Facebook to claim that they did not infringe any of Yahoo’s patents at all. But to do this, Facebook would need to convince the judges that since the patents are so broad and vague that they should not be enforced. This approach would paint Yahoo as a patent troll – only buying up multiple vague processes for the purpose of enforcing them for possible future financial gain. [Source: American University Intellectual Property Brief]
Since Yahoo was successful in 2003 in suing Google over patents held by the search-advertisement company Overture (which Yahoo purchased in 2004) and ended up receiving 2.7 million shares from the settlement just months before Google went public, only time will tell if Facebook and its IPO will fare better. [Source: International Business Times]
Image courtesy of smarnad
