Patently Offensive: Yahoo Sues Facebook

BY RYAN BYRNES

Back in the summer of 2004, Google was preparing to go public when, somewhat surprisingly, it was sued by fellow Internet giant Yahoo for patent infringement.

Now, with Facebook gearing up for its own IPO, it appears Yahoo is employing a similar tactic.

Yesterday, Yahoo sued Facebook for patent infringement in the United States District Court for the Northern District of California. The patents in question allege that Yahoo has patent protection over many seemingly common features of web design and social networking – including news feeds and personalized advertising – and that Facebook has wrongfully prospered by using Yahoo’s patented technology without permission.

The complaint specifically cites 10 Yahoo patents in question: four advertising patents, two privacy patents, two customization patents, a social networking patent and a messaging patent. Yahoo claims that much of Facebook’s growth since its 2004 launch has been a result of the use of these patents. It essentially states that all relevant aspects of the social network’s functionality is based on technology protected by Yahoo’s patents, including everything from its advertising model to its privacy policies.

“Facebook therefore owes much of its popularity with Internet users to its unauthorized infringement of Yahoo’s patents,” the complaint states.

Yahoo’s prayer for relief is nothing short of steep – it requests (in addition to damages) an immediate and permanent injunction, which would mean Facebook would be legally barred from using the technology in question.

According to the complaint, Yahoo notified Facebook of its infringing behavior on Feb. 27, when the two companies discussed the issue. But the issue remained unresolved, and the two are now on the litigation path, much to the chagrin of Facebook.

“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,” a company spokesman said.

While such a move might be common for “patent trolls,” it’s relatively rare for a company as large and prestigious as Yahoo. Venture capitalist Fred Wilson suggests that Yahoo has broken an unspoken agreement among web companies by suing Facebook over its patent portfolio. “I don’t think there’s a unique idea out there in the web space and hasn’t been for well over a decade,” Wilson said. “Pretty much everything useful is based on prior art going back before the commercial web existed.”

There is a sense within the industry that the suits are an example of Yahoo – whose growth has been stagnant – attempting to squeeze any revenue it can out of its patents and licensing deals. Facebook is particularly susceptible given its impending IPO.

The strength of Yahoo’s claims will hinge on how strictly a court interprets Yahoo’s patents. If a judge construes them broadly, then Facebook is unlikely to be the only website found to be infringing, since the technology that Yahoo alleges it owns is so commonly used on the web.

That’s assuming the matter ever gets to a judge. When Yahoo sued Google in 2004, the two sides reached a settlement. Yahoo ended up with 2.7 million shares of Google, and Yahoo agreed to license Google the rights to use some of the disputed patents.

Questions Surround iPad 3

BY MAT DELLORSO

Apple will unveil its heavily anticipated iPad 3 Wednesday morning. (Credit: Apple)

 The iPad 3 will be unveiled today. Buzz has trickled out in recent days, so here are a few things to look out for before Apple makes its big announcement Wednesday morning.

  • What will the iPad 3 be like? Take a look for yourself. This prototype video will blow your mind.
  • Is it that much better than the iPad 2? Probably. The public will initially be underwhelmed by the upgraded features, much like they were when the iPad 2 debuted last spring. But the new model is a significantly improved product in terms of both hardware and software.
  • What’s all the buzz about? One much-hyped feature is the edge-to-edge retina display. An estimated 2048×1586 display would be twice the resolution of the current model. Some rumors say the iPad 3 will be powered by a quad-core A6 chip. More details will become apparent Wednesday.
  • What will it cost? That’s not yet clear; anonymous sources are now dismissing rumors that it will be $80 more expensive than the current model ($499).
  • What does this mean for Apple stock? – Apple closed Tuesday at 530.26 and remains an attractive buy. It has a substantial piece of the the entire phone market. The iPad 3 indicates that the company has plenty of life left, even after the passing of Steve Jobs last year. Apple is the biggest company in the world, but it’s only going to get bigger.

Mat is a young entrepreneur contributing business and tech analysis to Yi!.