It's a patent war: Yahoo sues Facebook for infringement

Yahoo Inc., the onetime online advertising juggernaut dethroned by Facebook Inc., is suing the social networking giant over 10 patents that include ways to advertise on the Web.

The lawsuit filed in San Jose federal court Monday marks the first major patent battle in social networking. It comes as Facebook prepares to go public this spring in one of the most hotly anticipated stock market debuts in years.

In a statement, Yahoo said it is confident it will prevail.

"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," a spokesman said in an emailed statement. "Unfortunately, the matter with Facebook remains unresolved, and we are compelled to seek redress in federal court."

A Facebook spokesman accused Yahoo of turning on a business ally and said it would vigorously defend itself.

"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," the spokesman said in an emailed statement.

Patent fights are heating up all over Silicon Valley, where technology titans are buying companies to fatten up their patent portfolios and brawling in court.

Facebook and other social networking companies have seen an escalation in patent lawsuits in the run-up to IPOs, but mostly from firms that buy up patent portfolios, not from major technology players like Yahoo.

Yahoo, which has struggled to right itself for years, counted its more than 1,000 patents as a strategic asset as it reviewed its options, including selling a stake to outside investors or spinning off assets. The lawsuit is said to be part of a newly aggressive tact to turn around Yahoo under its new chief executive, Scott Thompson.

It’s not the first time that Yahoo has pursued this kind of payout, said BGC Partners analyst Colin Gillis. Yahoo forcedGoogle Inc. to hand over 2.7 million shares in a patent settlement before the Internet search giant’s 2004 IPO.

Gillis said he didn’t put much stock in the lawsuit.

"There’s not going to be an easy money here for Yahoo," Gillis said. "The play worked when they went after Google, but it doesn’ look like it’s working with Facebook."

LA Times