Almost everyone in the online and legal industries expected it. After weeks of rumors and news report that Yahoo! (NASDAQ: YHOO) had accused Facebook of patent violations, the portal has sued the social network for use of intellectual property which includes instant messaging and advertising and social tools. There has also been speculation about the timing. Yahoo! has a new CEO–Scott Thompson. He will supposedly layoff thousands of people to cut several hundred millions of dollars in costs each year. But, that is something his three predecessors have done, and Wall St. was unimpressed.
Thompson can prove he has a new innovative way to make money–IP suits. It cannot be viewed as a shameful way to make money. Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), and Eastman Kodak–among others–are in the same business. Valuable tech patents can bring in large sums of money as Microsoft has shown as it collects licence fees from most smartphone companies which use Google (NASDAQ: GOOG) Android mobile operating software. Microsoft has convinced those hardware manufactures that part of Android is built based on Microsoft IP.
Thompson has also likely looked at activist investors which have pushed AOL (NYSE: AOL) to use its patent portfolio as a way to add revenue through license fees. Older tech and internet firms may have patents that they have not reviewed for several years.
And, of course, Yahoo! could have not picked a better time to assault Facebook than ahead of its IPO which is expected to value the social network at $100 billion. Facebook will want to remove any significant impediments that might damage its share price before its underwriters take the company’s executive on their roadshow. If Facebook believes that Yahoo! has a reasonable claim, it will want to settle quickly.
Yahoo has sued Facebook for infringement of 10 patents that include methods for advertising and other social technology tools such as instant messaging. The patents involve how Facebook posts ads, privacy, including click fraud, and social technology such as email, which Yahoo called “vitally important” to the social network
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