Yep, Yahoo is suing Facebook on 10 patents relating to advertising and social networking

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Yahoo has launched its lawsuit against social networking company Facebook, claiming that it had infringed on 10 of its patents – all relating to social networking, customisation and advertising on the web. And, of course, it launched it before Facebook’s IPO coming up this year.

“For much of the technology upon which Facebook is based, Yahoo! got their first,” it boasted in its lawsuit. “Facebook’s entire social network model… is based on Yahoo!’s patent social networking technology. Prior to adopting Yahoo!’s patented social networking technology in 2008, Facebook was considered one of the wost performing Internet sites for advertising.”

That stat was based on this Gawker article.

And apparently, Yahoo won’t be satisfied by “payment of a royalty alone” – hinting possibly that this was to get some shares before the big IPO, like it did with Google all those years ago (quick history: Google got sued by advertising company Overture before being sold to Yahoo, then Yahoo and Google settled the case and got 2.7 million shares).

If Yahoo thinks that is where they can actually make money, then Yahoo is on the verge of being a dead company.

Facebook told CNBC that they were disappointed at the lawsuit. “We’re disappointed that Yahoo’s effort to engage with us was limited to a few short phone calls,” a spokesperson said.

However, even within Yahoo, a possible lawsuit was hotly debated and a large number of were opposed to the lawsuit because the company often used its patents as a defence mechanism, not an offensive as we see here today. A source talking to AllThingsD say that it was only their CEO Scott Thompson and legal counsel Michael Callaham working on the suit.

For Yahoo, it’s a very bold and risky move. If it loses, then it spent millions on a losing case (added with appeals). The company has no core business anymore – it offshored it to Microsoft’s Bing search engine, and its content production arm seems to be weaker in comparison with AOL and its Huffington Post merger (though, to be fair, the HuffPo merger saw a lot of key talent depart after it adopted a more aggressive SEO push).

It’s a case that potentially every social media company will be watching, as it could mean that they would be liable as well if it does succeed.

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