updated 04:50 pm EDT, Mon March 12, 2012
Yahoo goes on offense after patent dispute
(Updated with Facebook response mid-story) Yahoo brought its dispute with Facebook to a head on Monday by suing the social network. It alleged that Facebook was treading on ten patents focusing on ad and messaging, including ways to track and verify ad hits, privacy, social networking, and technologies like those behind Yahoo Messenger. The lawsuit claimed not only that Facebook was borrowing others' technology for elements like Facebook's News Feed but that Facebook effectively wouldn't exist without Yahoo's work.
"[Facebook's growth] has been based in large part on Facebook's use of Yahoo!'s patented technology," the search firm said, trying to argue that generic comments Mark Zuckerberg made about not being first were evidence he had copied Yahoo's work.
Yahoo asserted that it was owed an ongoing royalty, not just past royalties. Facebook had built up a large amount of web traffic by "free riding" on Yahoo's work, taking away share that purportedly would have stayed with Yahoo. It wanted Facebook to pay tripled damages for the claimed "willful" infringement as well as a permanent ban, which in practice would force Facebook to either significantly rearchitect its entire site or shut down.
Facebook, in a response, claimed that Yahoo had made only a token effort to negotiate before suing, implying that the goal had been to sue from the start. It wanted Yahoo as a friend and portrayed itself as being frustrated.
"We're disappointed that Yahoo's effort to engage with us was limited to a few short phone calls and that we continue to learn of new developments about a long-time partner through the press," Facebook said. "We will defend ourselves vigorously against these puzzling actions."
The San Jose-based lawsuit follows failed talks and is a major gamble for Yahoo, which continues to struggle with regaining its health. It will have to persuade a court that action was suddenly needed despite Facebook existing as a company for roughly eight years. Speculation has surfaced that the lawsuit was the reflection of a change in policy after the arrival of new CEO Scott Thompson and an attempt to squeeze more worth out of Yahoo before the business itself is truly profitable.