“Facebook me” has become part of the vernacular but, if a lawsuit filed by Yahoo! on 12 March 2012 is to be believed, we could just as easily have seen friends entreating one another to “Yahoo! me”. In the suit filed in the United Stated District Court for the Northern District of California, Yahoo! claims that Facebook has infringed ten of its patents and alleges that “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! alleges that “without Yahoo!’s achievements, websites such as Facebook would not enjoy repeat visitors or substantial advertising revenue” and that “for much of the technology upon which Facebook is based, Yahoo! got there first”. To prove this, Yahoo! points to a number of its patents for online processes including messaging, news feed generation, social commenting, advertising display, preventing click fraud and privacy controls.
The dispute could well be the first major legal battle between large technological companies in the social media space. Before filing proceedings, Yahoo! demanded Facebook pay it royalties for using the allegedly infringed patents. By filing the lawsuit, though, Yahoo! has upped the ante and is seeking triple damages and to prevent Facebook from using the relevant patents. Yahoo!’s aggressive stance calls to mind the film about Facebook’s creation, The Social Network, where one of the Harvard students who claimed to have come up with the idea of Facebook says of its CEO and co-founder Mark Zuckerberg – “I want an injunction, I want damages, I want punitive relief and I want him dead”. Yahoo! may not taking it this far, but they are clearly seeking to cause damage to Facebook with the suit being filed on the eve of Facebook’s initial public offering which is being touted as the largest internet IPO on record.
In response to the suit, a representative of Facebook commented “We’re disappointed that Yahoo, a long-time business partner of Facebook and a company that has substantially benefitted from its association with Facebook, has decided to resort to litigation. Once again, we learned of Yahoo’s decision simultaneously with the media. We will defend ourselves vigorously against these puzzling actions”. And it appears that arming themselves to defend the claim is exactly what they are doing.
As was demonstrated in the well-publicised proceedings between Apple and Samsung, a common strategy for defending a patent infringement claim is to claim that the applicant for relief is itself infringing intellectual property rights. Although Yahoo! has far more patents than Facebook (while reports vary, Yahoo! apparently has around 3,300 US patents to Facebook’s 50-odd), it seems the latter has been working hard to strengthen its arsenal. As well as a number of pending patent applications, Facebook has reportedly purchased around 750 patents from the largest US patent holder, IBM. IBM appears to have started a profitable side business of selling off its patents to technological companies in need, and it seems that business is booming with Google also recently purchasing about 2,000 patents during a patent dispute between it and Oracle. Other patent holders have also gotten in on the act, with an Apple Inc-led consortium apparently buying about 6,000 patents from Nortel Networks Corp and Google buying Motorola Mobility last year for US$12.5 billion indicating that Motorola’s patents were a prime attraction.
While it is clear that intellectual property rights are hot property in the tech-world, this case has many questioning the future of software patents. A number of commentators have noted that the case underscores a key issue with software patents in that many of them are overly broad and could have been developed by any one of a number of developers. Yahoo! even used a comment to this effect by Zuckerberg in its claim, where he said that “getting there first is not what it’s all about”, to show that he had conceded Facebook is not novel and is based on the ideas of others. But in an environment of constant development where multiple players are developing similar technologies at the same time, some commentators have expressed doubt as to how tenable Yahoo!’s claims are and many are viewing its lawsuit as an effort to increase its declining market value and relevance rather than an effort to protect its innovation.
The words of Mark Zuckerberg’s character in The Social Network seem quite apt in this context, for even if Yahoo!’s patents were used or drawn upon to develop Facebook, “if you guys were the inventors of Facebook, you’d have invented Facebook”. We have a feeling that there might be a new gap on Zuckerberg’s friend list around “Y”, and Yahoo! probably shouldn’t hold its breath waiting for a Christmas card this year.