Wednesday, March 14, 2012

Yahoo and Facebook Patent Controversy

Yahoo Inc. on 12th March, 2012 filed a patent infringement lawsuit against Facebook, essentially accusing the social media giant of building a company based on the Web pioneer's technology.

The company filed its suit before U.S. federal court in San Jose, arguing that "for much of the technology upon which Facebook FB 0.00% is based, Yahoo got there first and was therefore granted patents by the U.S. Patent and Trademark Office to protect those innovations."

Yahoo cited patents related to "cutting edge innovations in online products, including in messaging news, feed generation, social commenting, advertising display, preventing click fraud and privacy controls."

"Yahoo! has invested substantial resources in research and development through the years, which has resulted in numerous patented inventions of technology that other companies have licensed. These technologies are the foundation of our business that engages over 700 million monthly unique visitors and represent the spirit of innovation upon which Yahoo! is built. Unfortunately, the matter with Facebook remains unresolved and we are compelled to seek redress in federal court. We are confident that we will prevail."

Facebook quickly struck back, calling the action "puzzling" and noting that Yahoo has benefited from its association with the social network. One analyst called Yahoo's suit "a desperation move."Shares of Yahoo were up less than 1% in after-hours trading.

For example, Yahoo argued that Facebook's "entire social network model, which allows users to create profiles for and connect with ... persons and businesses is based on Yahoo's patented social network technology."

Yahoo is seeking damages that it argued should "be trebled in view of the willful and deliberate nature of the infringement."

This is pertinent to mention that the watered-down patent bill that was eventually signed into law by President Barack Obama in September mostly pleased the pharmaceutical industry, yet it failed to include the reforms sought by tech companies such as Apple Inc., Cisco Systems Inc. Dell Inc. and Intel Corp.

In the end, the "first-to-file" provisions in the America Invents Act tilted the playing field even further in favor of large, established players who can afford to employ armies of attorneys.

If the flurry of patent lawsuits over mobile computing and wireless technology that have been filed since the bill's passage is any indication, the legislation will end up being no more than a full-employment act for patent lawyers.

Facebook vowed to defend itself against the Yahoo suit.

The Facebook is  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. The Facebook said to the media persons that they will defend themselves vigorously against these puzzling actions.

As per the media reports BGC Partners analyst Colin Gillis called Yahoo's lawsuit "a desperation move," which is unlikely to derail Facebook's much-awaited public offering. "It does give the impression of a desperation move on Yahoo's part.

Yahoo is considered a pioneer of the Web, but the company has struggled against bigger and more innovative rivals led by Google Inc.  Facebook is seen as a pioneer in social networking, considered the next big wave on the Web. The company has filed for an initial public offering and is expected to go public later this year, one of the most anticipated IPOs in years. 


Yahoo, meanwhile, has seen its business shrink in recent years.

Now, in advance of Facebook's initial public offering, Yahoo is doing to the social-networking leader what it did to Google just before its IPO: sue over technology that Yahoo pioneered yet failed to implement successfully.

In 2004, Google ended up issuing pre-IPO shares to Yahoo to settle that dispute, and there's a chance we could see Facebook doing the same.

After last year's failed attempt at patent reform, the current system is the one that tech companies will be living with for the foreseeable future. That means we'll likely see more lawsuits like Yahoo's.

That's great news for patent lawyers, but bad news for consumers. 


The Complaint of the Yahoo! is attached herewith with the blog.

To read the original complaint by Yahoo against the Facebook click the link below

Prof. (Dr.) Tabrez Ahmad,
Program Director 
College of Law, Alliance University,
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