Yahoo says Facebook infringes its patents

Yahoo is threatening to entangle Facebook in a patent infringement dispute, claiming it holds the right to intellectual property that is central to Facebook’s social networking business.

The claim comes just months ahead of Facebook’s highly anticipated initial public offering, which could give Yahoo a bargaining edge and potentially position it to ask for a stake in the social networking group.

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

The patents in question, between 10 and 20 altogether, cover social networking, advertising and personalisation, according to a person familiar with the matter.

Facebook said it only learnt about the matter on Monday, adding: “We haven’t had the opportunity to fully evaluate their claims.”

Intellectual property battles are relatively new for Facebook, but likely to ramp up as the social networking company currently holds only 56 patents protecting its technology. It has filed more than 410 US patent applications in the past 18 months, according to M. CAM, an asset management firm, with various web companies, including Amazon, holding several social networking patents.

For Yahoo, the patent dispute could be a strategic move to raise money. The timing echoes that of a similar claim Yahoo brought against Google in the run-up to that company’s IPO in 2004. Yahoo had acquired Overture, the company that invented search advertising, and succeeded in persuading Google to pay up for a licence to use the technology. Google handed over 2.7m shares, which were worth $230m when it went public less than two weeks later.

One person familiar with Yahoo’s deliberations denied that the approach to Facebook was prompted by its imminent IPO. Rather, it reflected the hunt by new Yahoo chief executive Scott Thompson to boost the performance of all aspects of the company’s business, the person said.

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