Yahoo and Facebook announced on Friday, July 6, they have agreed to settle a high-profile legal dispute, putting an end to the ugly, yet short-lived patent litigation between the companies.
As part of the settlement, Yahoo and Facebook have signed a cross-licensing deal granting access to each others' patent portfolio, the two companies said in a joint statement. Moreover, Yahoo and Facebook have also made an advertising partnership and will expand their content distribution agreement. A settlement had been expected since Ross Levinsohn took over as Yahoo's interim CEO back in May.
Yahoo had filed a lawsuit against Facebook in March under the helm of former CEO Scott Thompson, alleging that the social networking company had infringed 10 of its patents related to advertising, online social networking, site customization, privacy, and communications. Yahoo claimed that Facebook's News Feed and the way it deals with privacy were in violation of its patents. Yahoo later added additional patents to the litigation, and indicated that more than a dozen others might follow. In the original lawsuit filed at the U.S. District Court in San Jose, Yahoo argued that "Facebook's entire social network model" was based on Yahoo's patented technology. Facebook countersued in April over 10 more patents.
Yahooo is roughly a decade older than Facebook, and has comprised an impressive portfolio of more than 1,000 patents. Until now, Yahoo had mostly used its intellective property for defensive purposes, which is why its move to sue Facebook sparked a lot of controversy and criticism. Some even suggested Yahoo was abusing its intellectual property.
The lawsuit against Facebook was filed under the helm of then-CEO Scott Thompson, who had assumed the leadership position at Yahoo in January and was looking for new sources of revenue. Thompson was ousted from the company in May, after news surfaced that his academic record was "misinterpreted." Levinsohn took over as interim CEO.
After countersuing Yahoo, Facebook also started making efforts to build a larger portfolio of intellectual property, a common strategy among tech companies seeking to protect themselves from patent litigation by gearing up. In its IPO filings, Facebook said it held 774 U.S. patents at the end of March, and 96 more patents in other countries.
Following Thompson's departure from Yahoo, Levinsohn sought to settle the patent litigation with Facebook. The two companies have been engaged in various partnerships before the litigation, including a deal that had Yahoo news stories passed among social contacts on Facebook. The two companies said on Friday they will work more closely together on the so-called "tent pole" events that require big marketing efforts for high-profile events such as the Olympics. News of the settlement agreement between Facebook and Yahoo was first reported by All Things D.
