Major patent litigation has hit the social media scene; Yahoo filed a legal suit against Facebook on March 19th in San Jose, California. While patent litigation has been increasing among technology companies, this is the first major patent suit to hit one of the social media giants. Although Yahoo has been one of Facebook’s business partners for a considerable period of time, the company decided to file the suit shortly after Facebook announced its plans for an initial public offering of stocks—a value that could amount to 100 billion dollars, according to some estimates.
Facebook reported that it first learned of the suit through the media and called Yahoo’s legal action “puzzling.” Facebook representatives also asserted that Yahoo has “substantially benefited from its association with Facebook” and they lament Yahoo’s decision to file suit.
Yahoo, a large tech company, is the owner of more than a thousand patents and the patents in question—ten of them—deal mainly with personalized advertisements. This type of advertisement is customized to address a website user’s interests. For instance, when a user searches for books, they are likely to see lots of book ads pop up in the ad bars. Facebook, on the other hand, owns just fifty-six U.S. patents. Yahoo asserts that Facebook has benefited from Yahoo’s research and patents by increased advertising revenue.
Yahoo hopes the litigation will force Facebook to adhere to a leasing agreement of the patents. Prior to adopting new technologies in 2008, Facebook was rated poorly for its advertising performance. Few would argue that Facebook’s adoption of new advertising systems and technology has not advantageously benefitted the company. Facebook has made many successful changes in its methods of advertising.
Technology experts believe this suit may negatively affect IPO; they think media the upcoming Facebook IPO and coverage of the case is likely to uncover some of the social media giant’s weaknesses at a pivotal moment. Yahoo is also demanding unspecified damages and a halt of any further infringements of these patents. Yahoo suing Facebook could indicate an increasing trend in patent rights litigation.
This isn’t the first time that Yahoo has gone to court over its patents at a pivotal moment. Yahoo reached an advantageous settlement with Google just before the internet search leader went public, too. Its settlement with Google has been valued at more than 200 million dollars. While some business experts regard this new suit as a grasping attempt by a company that is waning to pull down a company that is on the rise, others call the move well-timed and savvy. Targeting a company as it is about to go public, like the Google IPO, has often been shown to result in an agreeable settlement.
Although big patent cases are nothing new in federal court, this is considered the first major patent suit for a social media entity. Litigation over intellectual property rights has increased in other business sectors; recent cases have involved other large technology companies such as Motorola, Microsoft, and Apple.
As Facebook moves through the IPO process, media coverage will certainly train a careful eye over this court case and the eventual settlement that is likely to ensue from it. For the moment, media coverage centers upon Yahoo’s litigation announcement and the public opinion that now swirls around both companies.
Post contributed by Zoe Howard, on behalf of Phoneshop.co.uk
