Yahoo Rains On Facebook’s IPO Parade

Following Facebook’s amendment of its initial public offering last March 8, Yahoo hinted at filing a lawsuit for the social network giant’s patent infringement. This Monday, Yahoo turned on the taps by announcing the lawsuit against Facebook. This could potentially sidetrack Facebook’s IPO bid — which is estimated to generate over $100 billion for Mark Zuckerberg and company.

Yahoo sues Facebook for patent infringement

Yahoo filed the lawsuit in the U.S. District Court for the Northern District of California and outlined the reasons for the filing the case.

Facebook’s entire social network model, which allows users to create profiles for and connect with, among other things, persons and businesses, is based on Yahoo’s patented social networking technology.

Facebook only found out about the lawsuit through media reports, according to spokesperson Jonathan Thaw.

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.

Yahoo reportedly sought licensing fees from Facebook last month for its patents, saying other companies complied with their licensing deals.

Yahoo holds several types of patents that Facebook has apparently used and didn’t pay licensing fees for:

  • Advertising patents that help generate ads personalized for users.
  • Privacy patents that allow users to customize how their information is shared.
  • Customization patents for tailoring browser experience based on users’ needs and interests.
  • Social networking patent allowing users to customize personal information and join groups with similar interests.
  • Messaging patent combining e-mail and instant messaging on social networking sites.

Yahoo also sued Google before its IPO in 2004 and got Google stocks in return. Knowing Facebook’s position right now, Yahoo knows Facebook will settle the case as soon as possible so they can proceed with the IPO.

Yahoo wants Facebook to pay triple damages and all of Yahoo’s legal costs, and for Facebook to stop infringing on Yahoo’s patents.

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.

Yahoo collaborated with Facebook on several projects in the past, and I think this hiccup in their working relationship will be chalked up to “an opportunity too lucrative to resist.” A few million in stocks will just be a drop in the bucket for Facebook, and Yahoo will get its flagging enterprise a much needed boost.