Yahoo vs. Facebook: Likely the first major patent suit among tech giants

Yahoo filed a patent suit against Facebook this week at the San Jose federal court, making waves in Silicon Valley.

Yahoo claims Facebook has infringed 10 patents that it obtained over the past decade for software used to create and sell online ads, as well as for technology used in online messaging, customising content for individual website visitors and protecting visitors’ privacy, the Mercury News reported.

The covering technology areas are really “foundation of Yahoo’s business,” according to Yahoo’s statement in court documents. For example, Yahoo’s attorneys state that “ 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.”

Yahoo is also claiming that Facebook’s targeting ads to users is based on their ideas. It alleges that in 2008, before Facebook started using Yahoo’s patented technology, it was “considered one of the worst-performing Internet sites for advertising.”

Facebook has built a solid relationship with Yahoo in the past and had not imagined a day when they would meet at the court, the social network stated.

“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,” Facebook said in a statement, according to the Washington Post. “We will defend ourselves vigorously against these puzzling actions.”

Yahoo is likely wanting a piece of Facebook’s booming online advertising business, which earned US$3.15 billion in revenue last year, the Mercury News reported. Yahoo’s new CEO, Scott Thompson, is seeking every opportunity to increase profits.

According to some industry executives interviewed by The Wall Street Journal, Yahoo’s movement could be taken as a sign of weakness and recklessness, while also “stifling innovation.” Scott Kessler, an S&P Capital IQ analyst, said he believes Yahoo will lose its reputation.

“Pathetic and heartbreaking last stand for Yahoo. It’s all over, I loved you very much,” Eric Hippeau, a former Yahoo board member, tweeted. Meanwhile, Yahoo’s former engineer Andy Baio castigated Yahoo for having “weaponized” his work.

But not everyone agrees.

“I think Yahoo is doing the right thing. The company has to protect its intellectual property,” Trip Chowdhry, managing director of equity research at Global Equities Research, told Benzinga. “Facebook come and cop[ied] 10 years of innovation at Yahoo and [got] a free ride. It’s just not right.”

“Yahoo had every right to go after Facebook this way,” Peter Vogel, a partner and patent expert at Gardere Wynne Sewell, told Forbes. “From its own shareholders’ point of view that is good strategic planning.”

Yahoo will not be the only firm to declare a patent war. The San Jose Mercury News noted that legal experts predict more and more technology companies will stand out and start high-stake battles of patents in the future.

Image: CNET News
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