The escalating war between technology companies over intellectual property has had a number of unfortunate consequences, but perhaps none is sadder than the spectacle of an ailing Internet giant using the threat of patent litigation to extract money from an up-and-coming firm. Yet that appears to be Yahoo’s strategy, by demanding that Facebook pay it licensing fees — or else face a potentially costly patent dispute.
Yahoo says it owns patents for as many as 20 technologies that include online advertising, social networking, and messaging, according to The New York Times, which first reported the company’s threats against Facebook. Yahoo called Facebook on Monday to inform the booming social network, which could be worth $100 million after its IPO later this spring, that it currently infringes on those patents. As a result, Yahoo demanded that Facebook pay it licensing fees to cover those technologies, or face litigation.
(MORE: Facebook, Google Overtake Yahoo In Display Ad Market Share)
“Yahoo has a responsibility to its shareholders, employees and other stakeholders to protect its intellectual property,” Yahoo spokesman said in statement cited by the paper. “We must insist that Facebook either enter into a licensing agreement or we will be compelled to move forward unilaterally to protect our rights.”
A Facebook spokesperson declined to comment.
Yahoo has had a particularly rocky several months, as the company seeks to turn around a years-long slide that has seen it eclipsed, not only by one-time rival Google, but also by social media upstarts like Facebook and Twitter. Yahoo still has a huge audience, but it no longer commands the respect it once did as an Internet pioneer.
Last September, Carol Bartz was fired as CEO and in January, co-founder Jerry Yang left the company. In February, board chairman Roy Bostock resigned, clearing the way for Yahoo to sell its valuable Asian assets, but those talks have faltered.
Now Yahoo appears to be throwing itself head-first into Silicon Valley’s escalating patent wars, which have been particularly heated in the mobile phone space, if not between social networking companies. Apple has been waging a proxy patent battle against Google’s Android mobile operating system, targeting one of the search giant’s main hardware partners, Samsung.
(MORE: Facebook is responsible for creating 450,000 Jobs, Really?!)
Indeed, Google’s $12.5 billion purchase of Motorola Mobility was a way to gain access to 17,000 mobile technology patents, in part to defend against intellectual property attacks from Apple and Microsoft. Both of those companies, meanwhile, are part of a consortium that has agreed pay $4.5 billion to purchase some 6,000 patents from Nortel.
The problem for Yahoo is that no one likes a patent troll, and the company risks further harming its already-battered reputation at a time when it should be focusing its energies on rebuilding its business — not trying to shake-down newer, more successful rivals.