Yahoo on its last legs? Threatens Facebook with a patent lawsuit, wants royalties

By on

Is it Yahoo’s last stand? A report by the New York Times has revealed that the company is threatening Facebook with a patent lawsuit if it does not pay licensing fees for 10 to 20 patents it owns, which include advertising, web page personalisation, messaging and social networking. Yes, the signs of a dying company are definitely present.

“Yahoo has a responsibility to its shareholders, employees and other stakeholders to protect its intellectual property,” a spokesperson from Yahoo said. “We must insist that Facebook either enter into a licensing agreement or we will be compelled to move forward unilaterally to protect our rights.”

But how serious is the threat?

Well, very. A Forbes report back in November showed that Yahoo has over 1,100 patents granted, with an additional 2,661 patents pending. And that number is three or four times larger when you include international patents. And Yahoo does certainly have those patents, but the thing is to note that they use them defensively rather than as an offensive – meaning that if one company like Microsoft retaliates, then they can hit Microsoft back with its patents on search and advertising.

So this approach with Facebook is out of place. And there could be one thing for it.

Money.

Facebook’s IPO is official, and Yahoo simply wants a stake in the company. It also isn’t new from Yahoo, since it also did the same thing with Google. Yahoo, buying advertising company Overture, managed to strike a deal to end a patent spat that saw Google giving Yahoo 2.7 million shares in the company before its IPO in 2004. And it appears Yahoo is looking to Facebook to be some sort of magical cash cow that could save its problems.

And boy, Yahoo is in deep trouble – and by looking for its patent portfolio to make some money, that is a big sign for a company that is meant to be inventing and reinventing. There are speculations that both Google and Microsoft will buy them – not together, of course. Two questions emerge if its true – is it reducing competition, and why buy such a white elephant?

It might be time to break it up and allow each part to focus on what they do well at.

Thanks for coming onboard!
We're excited to have you.