Yahoo and Facebook settle patent suit; walk out as partners


Yahoo, in a scramble to revive their ailing company, rebranded itself as a patent troll and targeted Facebook for infringing on Yahoo patents. Facebook then fought back in what could have been a lengthy legal battle seemingly with no end in sight. But today, AllThingsD first reported that Yahoo and Facebook have finally settled its differences and the outcome is surprisingly amicable. The two companies are expanding their strategic partnership as a part of the settlement.

According to AllThingsD’s sources, the partnership will include a cooperation of advertising sales efforts and cross-licensing of patents between the two companies. This means that neither party may sue the other over these “shared” patents. 

The patents named in the lawsuit are as follows:

  • U.S. Patent No. 6907566 , 7100111 , 7373599  — “Method and system for optimum placement of advertisements on a webpage”
  • U.S. Patent No. 7668861  — “System and method to determine the validity of an interaction on a network”
  • U.S. Patent No. 7269590  — “Method and system for customizing views of information associated with a social network user”
  • U.S. Patent No. 7599935  — “Control for enabling a user to preview display of selected content based on another user’s authorisation level”
  • U.S. Patent No. 7454509  — “Online playback system with community bias”
  • U.S. Patent No. 5983227  — “Dynamic page generator”
  • U.S. Patent No. 7747648  — “World modeling using a relationship network with communication channels to entities”
  • U.S. Patent No. 7406501  — “System and method for instant messaging using an e-mail protocol”

To Facebook’s benefit, it was reported that the settlement did not include a cash payout to Yahoo and is contingent on the partnership agreement between both companies. For both parties, this agreement could prove to be lucrative and may help jumpstart Yahoo’s ailing media enterprise. The exact terms and partnership details will be announced later today.

Much of the blame for the patent lawsuit has been placed on the shoulders of ousted former Yahoo CEO, Scott Thompson, who was recently given the boot by Yahoo’s board after it was discovered that he had “padded his resume.” His Yahoo bio listed “accounting and computer science” degrees from Stonehill College, while in reality the CEO had graduated with just an accounting degree. Thompson’s strategy to recoup Yahoo’s depreciating value proved to be unpopular as it included reducing 14 percent of Yahoo’s workforce and making billions quickly through lawsuits against companies suspected of infringing on its portfolio of patents.

With Thompson gone and interim Yahoo CEO Ross Levinsohn at the helm of the company, Levinsohn immediately reached out to Facebook COO, Sheryl Sandberg, and negotiated a settlement. Prior to stepping in as CEO, Levinsohn was the Head of Global Media and Executive Vice President with the goal of building Yahoo into a global media conglomerate.

Despite having tarnished its reputation, Yahoo’s settlement will be boon both to Facebook and Yahoo. Facebook has avoided a lengthy legal fight after coming off of a disappointing IPO, while the ailing Yahoo has been provided unprecedented access to Facebook’s social graph in an effort to bolster its social-based advertising.