Aspiring Patent Troll Yahoo Shakes Down Facebook

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On the eve of Facebook’s heralded IPO, Yahoo is trying to shake down Facebook, demanding payment for infringement of 10-20 of its patents. Yahoo and Facebook had been buddy-buddy until Yahoo made its move, but this will at least shake things up.

Yahoo, after all, is largely irrelevant to most internet users. Aside from sending email to people who haven’t yet switched to Gmail and the occasional news article, I have not used Yahoo in years. Yahoo knows that if it can’t do an about-face now, it is on the decline. It’s only a matter of time until it is absorbed by company for essentially the value of its intellectual property (i.e., RIM, Kodak, Nokia). Seeking to reap a bid-pay day, a la the pre-IPO settlement Yahoo made with Google, whereby Google gave Yahoo 2.7 million shares in a patent settlement before the search giant’s 2004 IPO. Investors do not want the uncertainty of litigation when they buy chunks of a $100 billion company. If the prospective suit has merit – and I have no idea whether it does – Facebook will probably settle. It can afford it, and historically it has been conservative with patents, knowing that it has a relatively weak inventory of its own.

Yahoo is not keeping this a secret. On the contrary, Yahoo has told the NY Times that the two companies met, and that Yahoo, “We must insist that Facebook either enter into a licensing agreement or we will be compelled to move forward unilaterally to protect our rights.”

Yahoo’s shareholders, who will probably get a short-term dividend, should be worried; Yahoo’s innovation ended about 10 years ago. Facebook is already ten times Yahoo’s size, and keeps innovating (for better or worse).

More analysis from a guy who called this a mile away: Techcrunch.


Posted On
Mar 19, 2012
Posted By
patent litigation

Though of course it’s completely legal for companies to enforce their IP against their competition, I am ambivalent; is it ethical for corporations to use patent litigation merely as an anti-competitive tactic, or should these disputes be settled in the marketplace, where they belong?

Posted On
Mar 19, 2012
Posted By
Aaron Thalwitzer

No doubt, anyone can be sued, and it doesn’t take much for it to be “legal”. I’m more interested in what it says about the plaintiff and defendant, and our patent system, in each case. Here, Yahoo is shaking FB down, plain and simple. This suit could have been brought years ago, but they used some strategery and waited for an opportune moment. Thanks for the comment!

[...] employees were furious at the time as “Aspiring Patent Troll Yahoo Shakes Down Facebook” with patents from engineers who never wanted software patents anyway. Yes, even many of those who [...]

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