Yahoo and Facebook Will Have Their Day in Court

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Here’s another lawsuit in the already bristling-with-litigation arena of technology patents. Yahoo (NASDAQ:YHOO) is suing Facebook in a first for the search major, which has traditionally avoided taking patent problems with large public companies to court. The suit is another first as well: it is the first major patent lawsuit in the social networking technology field.

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The dispute relates to 10 patents, out of which only two relate to social networking. The others focus on advertising, click fraud, customers’ privacy, and web page customization.

Last month, Yahoo sought licensing fees from Facebook for use of its patents. “Unfortunately, the matter with Facebook remains unresolved and we are compelled to seek redress in federal court,” the company said in a statement. In the lawsuit itself, Yahoo claims Facebook was considered “one of the worst performing sites for advertising” prior to adapting Yahoo’s ideas, and that, “Mr. Mark Zuckerberg, Facebook’s founder and CEO, has conceded that the design of Facebook is not novel and is based on the ideas of others.”

“We’re 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,” said Facebook spokesman Jonathan Thaw.

Only time will tell the fate of Yahoo’s claim, but there’s no denying Yahoo’s timing couldn’t be better — it is raking up the issue just as Facebook is on the verge of launching its highly-anticipated blockbuster of an IPO. Shades of what it did to Google (NASDAQ:GOOG)? Yahoo strong-armed Google into issuing shares nine days before Google went public in 2004 in exchange for a license to Yahoo’s patents.

Could Facebook counter-claim? Maybe, but it really is a David-Goliath story here: Yahoo owns upwards of 3,300 patents or patent applications, Facebook a mere 160.

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To contact the reporter on this story: Alex Capel at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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