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Yahoo! Sues Facebook Over Patents Related to Advertising

Tuesday, March 13, 2012

Facebook Inc. (FB) was accused in a lawsuit by Yahoo! Inc. (YHOO) of infringing patents covering functions critical to websites, including Internet advertising, information sharing and privacy.

In a complaint filed yesterday in federal court in San Jose, California, Yahoo asked for an order barring Facebook from infringing the 10 patents and for triple damages. The patents cover tasks required to “build a successful website,” such as information customization, social networking and messaging, according to the complaint.

Yahoo, owner of the most popular U.S. Internet portal, said in February that Facebook must license its technology, pointing out that other Web companies have done so. Yahoo is looking for ways to revive growth after losing ground to Facebook in the display advertising market and trailing Google Inc. (GOOG) in Web searches.

“For much of the technology upon which Facebook is based, Yahoo! got there first,” the company argued in its complaint. “Facebook’s entire social network model, which allows users to create profiles for and connect with, among other things, persons and businesses, is based on Yahoo!’s patented social networking technology,” Yahoo said.

Yahoo lost its No. 1 spot to Menlo Park, California-based Facebook last year in the U.S. market for display advertising, which includes video and graphically based marketing messages, according to EMarketer Inc. In January, Yahoo, based in Sunnyvale, California, reported fourth-quarter revenue of $1.17 billion, excluding sales passed on to partner sites. That fell short of analysts’ estimates of $1.19 billion.

‘Longtime’ Partner

“We’re disappointed that Yahoo, a longtime business partner of Facebook and a company that has substantially benefited from its association with Facebook, has decided to resort to litigation,” Facebook said in a statement.

“Once again, we learned of Yahoo’s decision simultaneously with the media,” Facebook said. The company said it would defend itself against what it called “these puzzling actions.”

Yahoo said in an e-mailed statement that its patented technologies attract more than 700 million unique visitors each month.

“Unfortunately, the matter with Facebook remains unresolved and we are compelled to seek redress in federal court,” Yahoo said in the statement.

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