Talks fall apart: Yahoo to sue Facebook (rumor)

Talks fall apart: Yahoo to sue Facebook (rumor)

Summary: Yahoo's talks with Facebook have fallen apart, so the online giant is planning to sue the social networking for patent infringement, according to a new rumor. There are 13 patents in question.

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Last week, Yahoo became a patent troll by threatening Facebook with patent war. Yahoo CEO Scott Thompson is rumored to be the one to blame, in addition to the massive layoffs he's planning for the company. Now it seems that talks with Facebook have fallen apart, meaning Thompson's first big move will either be an announcement to cut thousands of jobs, or the filing of a massive lawsuit. Both events are still in the rumor box.

Yahoo will seek "formal action" against Facebook over alleged patent infringements, the most likely of which is a lawsuit, according to a source briefed on the aborted talks between the companies cited by Business Insider. Yahoo will reportedly claim Facebook is using its inventions in online advertising and social networking without paying patent fees. Yahoo may even go as far as seeking a percentage of Facebook's revenues going forward.

Yahoo's stance is unchanged. "Yahoo has a responsibility to its shareholders, employees and other stakeholders to protect its intellectual property," a Yahoo spokesperson said in a statement. "We must insist that Facebook either enter into a licensing agreement or we will be compelled to move forward unilaterally to protect our rights."

Facebook also hasn't issued a new statement. The one made at the time of the breaking news said the company hasn't had "the opportunity to fully evaluate" Yahoo's claims. That being said, in the social networking giant's updated IPO filing today, however, Facebook briefly mentioned flagged its potential legal battle with Yahoo. Menlo Park says it received a letter from Yahoo, claiming that Facebook infringes on 13 of Yahoo's patents.

Facebook, which is investigating the claims, said Yahoo had not begun any legal action. More generally, Facebook said it expects the number of lawsuits against it to increase. Here's the relevant excerpt from today's IPO filing update:

We presently are involved in a number of lawsuits, and as we face increasing competition and gain an increasingly high profile, including in connection with our initial public offering, we expect the number of patent and other intellectual property claims against us to grow. For example, on February 27, 2012, we received a letter from Yahoo! Inc. that alleged that a number of our products infringe the claims of 13 of Yahoo's patents. We are still in the process of investigating the allegations contained in the letter. To date, Yahoo has not commenced any legal action against us, but it may do so in the future.

The United States Patent and Trademark Office (USPTO) shows just how vulnerable a new technology company can be at the hands of an old company when it comes to a patent war. Yahoo has thousands of patents while Facebook has 62, though it's hard to say if Facebook will argue Yahoo infringes on any of them.

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Topics: Legal, Social Enterprise

Emil Protalinski

About Emil Protalinski

Emil is a freelance journalist writing for CNET and ZDNet. Over the years,
he has covered the tech industry for multiple publications, including Ars
Technica, Neowin, and TechSpot.

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  • here we go again!!

    the whole patent thing is a farce with companies claiming and even buying patents simply to protect outdated businesses. The time has surely come to completely overhaul this long outdated patent system - it belonged to an era when an inventor spent years developing a product, building a model and the machinery to manufacture it. In the software arena is just a question of writing and changing code in sometimes in a few minutes. Patents should apply only to physical objects and only when they can prove themselves completely innovative and unique.

    Open the door by getting rid of all software patents and then every company will have to survive on what the innovate today and tomorrow, rather than what they did yesterday. The system as it is at the moment stifles development especially by small companies and individuals who do not have the ability to hire teams of overpaid lawyer parasitses.

    All software should be declared free of any patents or copyright overnight putting everyone on an even playing field!
    cymru999
  • Facebook's Patent Infringement

    Yahoo "threatens" Facebook, how has something far more serious gone unnoticed? Perhaps one that nearly every business writer in the land is unaware of??? aside from only a determined blogger, a couple of television stations and as of today, perhaps 2-3 investigative reporters picking this up this week?
    As you write about Yahoo???s patent ???claims???, why not mention something potentially far more ominous to the IPO investors? As opposed to Yahoo???s ???claims???, a little David, (Leader Technologies), just took on Goliath (Facebook) in the US Federal Court of Appeals this week (March 5). If this case was heard by the only court higher, the US Supreme Court, would it then warrant mention by the press? Better check out the infringement claims against Facebook WON by Leader thus far! I can only surmise that the mainstream press simply overlooked this, or they think that Leader will be dead soon, having expended all of it???s resources in this noble battle. On the latter, I think not! This could be a watershed of several events, a monumental test and validation of our own patent laws, judiciary propriety, or even financial damages so sizable, that if arrived at, would certainly be on the front page of every newspaper on Earth.
    MNinvestor