Yahoo Joins Patent Wars, Says Facebook Is Infringing IP

You have to wonder whether Yahoo’s patent-saber rattling is a sincere effort to enforce its intellectual property or an admission about Yahoo’s competitive position relative to Facebook. After several years of turmoil, internal politics and a loss of talent the company is struggling to regain its place in the pantheon of top-tier internet companies.

Reuters and the NY Times reported yesterday that Yahoo is now asking Facebook for licensing fees related to “10 or 20 patents.” The particular patents aren’t identified; however Yahoo owns several thousand, covering things like content and advertising personalization. It’s thus quite possible that Facebook is in fact infringing from a technical-legal standpoint.

But if their positions were reversed and Yahoo were growing usage and revenues dramatically would the company be equally seeking to generate licensing revenue from Facebook?

The so-called “patent wars” have engulfed a wide range of companies including Google, Apple, Microsoft, Samsung, Nokia, Kodak, RIM and others. And the high-stakes global litigation and other legal wrangling have motivated many companies large and small to reevaluate the value of their IP portfolios.

Suddenly patents are a lot more valuable than they used to be. Just ask Google, which paid $12.5 billion for Motorola Mobility in large part because of its patent portfolio.

Neither Yahoo nor Facebook said much of a substantive nature about the potential claims. However the NY Times quoted a Yahoo spokesperson who said the action was motivated by a fiduciary duty to shareholders in part:

“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.”

The NY Times’ report added that “Yahoo has asserted claims on patents that include the technical mechanisms in the Facebook’s ads, privacy controls, news feed and messaging service, according to a source briefed on the matter.”

Microsoft, which is struggling to compete in the mobile marketplace with its Windows Phone operating system, has pursued a parallel strategy of IP licensing. By some estimates Redmond is now making considerable revenue from Android OEMs. Microsoft is both trying to generate revenue but also trying to “raise the cost” of Android devices and thereby improve the competitive position of its own OS.

It’s unlikely that any Yahoo-Facebook patent tiff will impact the forthcoming Facebook IPO or dampen investor demand.