Yahoo has decided to throw the first punch in one of the rare legal battles involving major technology companies that deal with social media. Facebook is on the receiving end of the lawsuit filed by Yahoo. The company claims that Facebook has infringed a total of 10 patents that relate to methodologies used by companies to advertise on the web.
Yahoo filed the lawsuit in federal court in San Jose, Calif on Monday. There have been many lawsuits in the smartphone and tablet markets and this lawsuit by Yahoo might just be a sign that the floodgates of social media lawsuits are just about to open. Smartphone and tablet manufacturers have been on each other’s necks for several years now with lawsuits being filed all over the world. The lawsuits have had serious implications on company profits of major manufacturers as they are forced to discontinue selling their products in some parts of the world.
This lawsuit has been filed at a critical moment in Facebook’s history as it has announced an IPO in the not too distant future. The IPO could see the company valued within the range of $100 billion, which is not exactly peanuts. Any disturbances could have serious repercussions for the company at this point in time.
Yahoo has been very mum about the lawsuit since even Facebook’s spokesman Jonathan Thaw has said that the company learnt about it in the media. The spokesperson for Facebook said that the company is disappointed to be sued by Yahoo, its longstanding business partner that has benefited a lot from the association.
Yahoo on the other hand is not mincing its words when it says that it is very confident that the case is going to be ruled in its favor. The company says that the bones it has to pick with Facebook cannot be settled over a cup of tea and has to be decided by a court of law. The ‘matter’ according to Yahoo, still remains unresolved, which has forced its hand and compelled it to let a federal court decide how it is to be settled.
Yahoo has been suffering a steady decline in profits even being one of the first big names on the internet. This is on the backdrop of intense competition from companies such as Google, Microsoft, and Facebook. The company has some fresh blood at the top seat of chief executive after firing the former CEO in September. The company appointed Scott Thompson in January, who was the former President of PayPal.
Yahoo says that other companies have already accepted licensing deals with the company and wants Facebook to follow suit. According to a Santa Clara Law professor, Colleen Chien, a company is most vulnerable to lawsuits when it has an upcoming IPO.
Chien says that a legal tussle is the last thing that a company would want when it is about to have an IPO. The professor says that Facebook is more likely to want to see a quick resolution to this rivalry with Yahoo.
Yahoo has perfect timing for such actions as history has it. In 2004, it forced Google’s hand to give it some shares in its IPO in exchange for licensing rights to its patents. Later, Google took $201 million as a non-cash charge for the transaction.
Yahoo says that before Facebook adopted its advertising ideas, it was considered to be among the worst performing advertising sites. The lawsuit claims that Facebook founder and CEO, Mark Zuckerberg himself agreed that the design of Facebook is not an original one.