It’s getting messy out there! Failing internet site Yahoo (ah, remember Yahoo?) is telling Facebook it better enter into a licensing agreement and begin to pay licensing fees with it or else they will “protect their rights.”
Apparently, Yahoo believes that the social media juggernaut that is Facebook is actually using some proprietary technology to manage its 845 million users. Yahoo claims that Facebook is using somewhere between ten and twenty of Yahoo’s patented software elements, mainly centered around Facebook’s ads, privacy controls, news feed and messaging service.
If Yahoo goes to legal war over this issue with Facebook, it will likely be only the opening shot in a patent war that will erupt between social media giants. Apparently there are great areas of overlapping technology, and this particular legal struggle has been simmering for years.
Yahoo emailed this statement to the New York Times:
“Yahoo has a responsibility to its shareholders, employees and other stakeholders to protect its intellectual property,” a Yahoo spokesman said in an e-mailed 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.”
It’s likely that Yahoo chose this particular moment to go after Facebook because of Facebook’s planned IPO. (What is an IPO? It’s explained well here.) It’s unknown when, exactly, Yahoo began raising its objections, but it is confirmed that representatives of the two companies met on Monday.
There is no doubt that Yahoo is in trouble. This article in the Economist sums it up well:
When the history of the internet industry comes to be written, Yahoo! will deserve a special place in it for all the wrong reasons. Rarely has a company managed to destroy so much shareholder value in so short a time.
Patent lawsuits are not new to Silicon Valley, but they are new to social media sites. It will be quite interesting to see how this plays out, but it’s hard to imagine much of anything standing in Facebook’s way at this point.