Yahoo is suing Facebook for copying a range of technologies that the flagging search company invented, in a lawsuit that alleges the social media giant infringes 10 patents.
"Facebook's entire social network model, which allows users to create profiles for and connect with, among other things, persons and businesses, is based on Yahoo's patented social networking technology," Yahoo said in the lawsuit filed yesterday in the US District Court for the Northern District of California.
Yahoo accuses Facebook of infringing patents covering technologies related to advertising, privacy, site customisation, social networking and integrated communications in social networking.
News Feed infringement
The suit describes several Facebook features that Yahoo alleges use its technology. Facebook's News Feed, the primary way of viewing friends' activity, infringes Yahoo's customisation patents, according to Yahoo. The way Facebook handles privacy infringes Yahoo patents related to privacy, it said.
The format of many ads, such as Facebook's Premium Video Comment Ads, are based on Yahoo inventions, according to Yahoo. And the way Facebook displays and arranges ads and combats click fraud using the pay-per-click model infringe Yahoo patents, it said.
Yahoo didn't say if it had offered to license the technologies to Facebook, though reports last month suggested that Yahoo threatened the social networking site with legal action if it didn't make a deal.
Facebook said that it was surprised by the move.
"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. Once again, we learned of Yahoo's decision simultaneously with the media. We will defend ourselves vigorously against these puzzling actions," it said.
It's likely no coincidence that Yahoo filed the suit now, just before Facebook is set to go public. "I think the timing coincides with the IPO and they're going to try to use the IPO as a source of pressure to get them to settle rather than litigate," said Greg Sterling, an analyst with Sterling Market Intelligence.
The strategy echoes Yahoo's decision to sue Google just before that company filed for its IPO. Yahoo sued Google for allegedly infringing patents controlled by Yahoo subsidiary Overture. Onlookers thought Google settled that dispute so that it wasn't involved in any potentially costly legal action when it went public.
In the suit against Facebook, Yahoo argues that simple back payment of royalties won't suffice.
Royalties not enough
"Yahoo is harmed by Facebook's use of Yahoo's patented technologies in a way that cannot be compensated for by payment of royalty alone," Yahoo's lawyers wrote. "Facebook's use of Yahoo's patented technologies has increased Facebook's revenue and market share because it does not have to recover the cost or time involved in the development of the technology."
While the suit may look like a change in strategy for Yahoo, that's likely not the case, Sterling said.
"The tendency is to see this as a sign of resignation by Yahoo, that they can no longer compete and they're going to get money now through patent litigation because they can't generate revenue through advertising," he said.
However, he thinks Yahoo is just taking an opportunity presented by Facebook's public offering to secure a potential cash infusion.
Yahoo did not reply to a request for additional comment on its lawsuit.