Clash of the Titans: Yahoo Sues Facebook for Patent Infringement
Another week, another high profile lawsuit involving two technological heavyweights. This time, Yahoo!, Inc. (Yahoo) has filed a lawsuit against Facebook, Inc. (Facebook) alleging infringement of 10 of its patents. Yahoo’s patent claims focus on processes that are critical to the functioning of social networking websites, such as adaptive advertisements and privacy tools. Yahoo’s suit is troubling because of the wide swath it carves out for potential infringers.
Some of Yahoo’s more interesting patents include one for customizable privacy settings and another for customized content feeds, such as Facebook’s newsfeed. There is no doubt that Facebook utilizes these features on its website, just as countless other social networking websites like Google+ and Twitter do. However, these patents are strikingly vague and allowing Yahoo to enforce them against Facebook could present a major problem for the rest of the social networking world. If Yahoo is successful in a suit against Facebook, what will stop them from going after Pinterest or FourSquare? Regardless of whether observers believe that Yahoo’s patents are too vague to be realistically enforceable, the United States Patent and Trademark Office (USPTO) approved these patents and Yahoo has the right to enforce them against alleged infringers. Facebook has vowed to fight Yahoo’s lawsuit and it has a couple of options to resolve the suit.
Facebook’s first option in fighting the lawsuit is to claim that Yahoo’s patents are invalid based on obviousness or non-novelty. The two primary factors the USPTO considers when granting patents are non-obviousness and novelty, both of which are determined by prior art. If Facebook can find prior art for each of Yahoo’s claims, it can invalidate those patents. Given the broad scope of the majority of Yahoo’s patents, it seems possible that Facebook will be able to find some prior art that overlaps the claims in Yahoo’s patents. The second option that Facebook could pursue is to claim that its website processes do not infringe on any of Yahoo’s patent claims. As part of the non-infringement defense, Facebook would try to utilize patent claim construction — which is where a court construes specific terms within each patent claim — to say that its processes do not infringe Yahoo’s patents. Some observers believe that since Yahoo’s patents are so broad, Facebook could convince a judge to refuse to enforce them because of their vagueness. Given the broadness of the patents at issue, it seems possible that Facebook could demonstrate non-infringement for many of the patent claims. However, Yahoo’s instant messaging patent, which is sufficiently narrow and utilized by Facebook, is likely to cause the social networking giant some trouble if the suit makes it to trial. Facebook’s last option is to settle the suit, which seems likely given what is at stake for the company during its Initial Public Offering (IPO).
Yahoo’s suit against Facebook differs from other clashes between major tech companies, such as Apple and Samsung’s fierce battle over the “slide to unlock” mechanism, because of Yahoo’s timing and motivation. Facebook recently issued an IPO where it plans to raise $5 billion. The final valuation of the IPO has been estimated to be anywhere from $75 to $100 billion. The last thing Facebook wants hanging over its IPO is a lawsuit because it could affect the IPO’s final valuation. Yahoo is well experienced with attacking tech giants at their most vulnerable, such as when Yahoo sued Google in 2004 during its IPO. Based on that suit, Yahoo was able to pressure Google for nearly 3 million shares, which translates to a value of roughly $1.5 billion in today’s money. With Yahoo’s declining stock value, it makes sense that it would attack Facebook to help boost its assets. What is troubling about Yahoo’s approach is that the suit appears to be solely for financial gain, essentially making Yahoo a patent troll. While opinions differ over the legitimacy of Yahoo’s suit, there is no denying that the outcome will have a lasting impact on both companies. With news that Facebook has bolstered its defenses by acquiring 750 patents from IBM, this clash of the titans may turn into a real spectacle.