Dan Levine and Alexei Oreskovic San Francisco
Yahoo has sued Facebook over 10 patents that include methods and systems for advertising on the web, opening the first major legal battle among big technology companies in social media.
The lawsuit, filed in a California federal court on Monday, marks a major escalation of patent litigation that has already swept up the smartphone and tablet sectors and hi-tech stalwarts such as Apple, Microsoft, Samsung and Motorola.
Yahoo’s patent lawsuit follows Facebook’s news of plans for an initial public offering (IPO) that could value the firm at about $100 billion (R757bn).
Facebook spokesman Jonathan Thaw said the company had learned of the lawsuit through the media.
“We’re disappointed that Yahoo, a long-time business partner of Facebook and a company that has substantially benefited from its association with Facebook, has decided to resort to litigation.”
Yahoo said it was confident it would prevail.
The firm’s revenues have fallen at a time when rivals have thrived. In January, Yahoo appointed former PayPal president Scott Thompson as its new chief executive, replacing Carol Bartz, who was fired last September.
Yahoo said late last month that it was seeking licensing fees from Facebook for its patents and that other groups had already agreed to such licensing deals.
Colleen Chien, a law professor, said firms were usually more vulnerable to patent suits during an IPO process.
“When a company is about to go public, the last thing it needs is to get involved in a… litigation fight,” Chien said.
“So that might make Facebook more willing to resolve its differences with Yahoo.”
Yahoo has used similar timing to its advantage in the past. Google agreed to issue shares to Yahoo nine days before going public in 2004 in exchange for a license to Yahoo’s patents. Google later took a $201 million non-cash charge related to the deal.
In deciding to sue Facebook, Yahoo has retained the same law firm, Quinn Emanuel Urquhart & Sullivan, used by Google and other manufacturers in many Android-related smartphone patent cases.
Yahoo has not said whether it would bring patent claims against other social networking groups and a Google spokesman declined to comment on Quinn Emanuel’s involvement.
In the lawsuit, Yahoo says Facebook was considered “one of the worst-performing sites for advertising” prior to adapting Yahoo’s ideas.
Only two of the 10 patents at issue are directly related to social networking technology. Most focus on advertising, privacy and user customisation.
“If what Yahoo is saying is… true, then it seems like a lot of companies would be liable,” said Shubha Ghosh, a professor of intellectual property. But much would depend on whether a judge defined the patents broadly or narrowly, he said.
Most recent patent lawsuits during social media IPOs have been filed by aggregators that buy up intellectual property to squeeze value from it via licensing deals and none by a large tech company such as Yahoo.
Yahoo has never initiated offensive patent litigation against such a large publicly traded company, according to Thomson Reuters.
A classic defence for companies targeted with patent claims is to threaten a countersuit. But Yahoo has far more patents than Facebook. Yahoo has 3 300 patents and published patent applications, while Facebook has 160. – Reuters