Facebook Countersues Yahoo Over Patents

The legal spat between Yahoo and Facebook has deepened in the runup to Easter after Mark Zuckerberg’s company launched its own counter lawsuit against Yahoo.

The move comes in response to Yahoo, which last month hit Facebook with a lawsuit, and demanded triple damages for infringement of ten patents relating to privacy, messaging and advertising.

That lawsuit came only a few weeks after Yahoo  demanded licensing fees from Facebook for the patents.

IPO Risk?

“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 said at the time. “Unfortunately, the matter with Facebook remains unresolved and we are compelled to seek redress in federal court.”

The timing of Yahoo’s lawsuit could not have been worse for Facebook, which is in the final stages of preparing for its impending initial public offering (IPO) in May. This IPO should see the social networking giant raise $5 billion (£3.1bn), which would give the company a total valuation of $100 billion (£64 billion).

Lawsuits like the one from Yahoo could potentially upset or scare off potential investors.

So Facebook reacted quickly to Yahoo’s lawsuit and bolstered its legal war chest by acquiring 750 patents from IBM. There is little doubt that Facebook was ‘patent lite’ before this purchase, as its patent portfolio previously stood at just 53 issued patents and 503 filed applications with the US Patent and Trademark Office.

Facebook Counterattack

And now Facebook has decided that attack is the best form of defence after it filed a counterclaim in a San Francisco federal court. It is reportedly using its recently acquired IBM patents to sue Yahoo.

Facebook alleges that Yahoo is now infringing ten of its patents that cover Flickr, Yahoo’s homepage and a number of other pages from Yahoo’s website. This includes personalised story feeds, user recommendation systems and tagging digital media etc.

According to Reuters, five of the patents asserted by Facebook target features related to Yahoo’s online advertising business, which Facebook said made up 80 percent of Yahoo’s 2011 revenue.

Yahoo spokesman Eric Berman was quoted as saying that Facebook’s counterclaim is “nothing more than a cynical attempt to distract from the weakness of its defence.”

Meanwhile Facebook General Counsel Ted Ullyot reportedly said that the company would defend itself vigorously in the face of Yahoo’s lawsuit.

“While we are asserting patent claims of our own, we do so in response to Yahoo’s short-sighted decision to attack one of its partners and prioritize litigation over innovation,” Ullyot said in a statement.

How Much Do You Know About Yahoo? Take our quiz.