Yahoo
is accusing Facebook of copying a range of technologies that the flagging
search company invented, in a lawsuit that alleges the social media giant
infringes 10 patents. "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 wrote in the lawsuit filed Monday in the U.S. District
Court for the Northern District of California. Yahoo accuses Facebook of
infringing patents covering technologies related to advertising, privacy, site
customization, social networking and integrated communications in social
networking. The suit describes several Facebook features that Yahoo alleges use
its technology. Facebook's News Feed, the primary way of viewing friends'
activity, infringes Yahoo's customization patents, according to Yahoo. The way
Facebook handles privacy infringes Yahoo patents related to privacy, it said. The
format of many ads, such as Facebook's Premium Video Comment Ads, are based on
Yahoo inventions, according to Yahoo. And the way Facebook displays and
arranges ads and combats click fraud using the pay-per-click model infringe
Yahoo patents, it said. Yahoo didn't say if it had offered to license the
technologies to Facebook, though reports last month suggested that Yahoo
threatened the social networking site with legal action if it didn't make a
deal.
In
a statement Monday, Facebook said it was surprised by the move. "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. Once again, we learned of Yahoo's decision simultaneously
with the media. We will defend ourselves vigorously against these puzzling
actions," it said. It's likely no coincidence that Yahoo filed the suit
now, just before Facebook is set to go public. "I think the timing
coincides with the IPO and they're going to try to use the IPO as a source of
pressure to get them to settle rather than litigate," said Greg Sterling,
an analyst with Sterling Market Intelligence. The strategy echoes Yahoo's
decision to sue Google just before that company filed for its IPO. Yahoo sued
Google for allegedly infringing patents controlled by Yahoo subsidiary
Overture. Onlookers thought Google settled that dispute so that it wasn't
involved in any potentially costly legal action when it went public. In the
suit against Facebook, Yahoo argues that simple back payment of royalties won't
suffice. "Yahoo is harmed by Facebook's use of Yahoo's patented
technologies in a way that cannot be compensated for by payment of royalty
alone," Yahoo's lawyers wrote. "Facebook's use of Yahoo's patented
technologies has increased Facebook's revenue and market share because it does
not have to recover the cost or time involved in the development of the
technology." While the suit may look like a change in strategy for Yahoo,
that's likely not the case, Sterling said.
"The
tendency is to see this as a sign of resignation by Yahoo, that they can no
longer compete and they're going to get money now through patent litigation
because they can't generate revenue through advertising," he said. However,
he thinks Yahoo is just taking an opportunity presented by Facebook's public
offering to secure a potential cash infusion. Yahoo did not reply to a request
for additional comment on its lawsuit.
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