Yahoo takes Facebook to court over ad patents

Two of the most well-known names on the Internet are headed into intellectual property war over 10 patents that Yahoo claims made Facebook what it is today — the world’s most successful social media website.

Yahoo has had better days. Faltering revenues, relentless competitors and a deflated stock price — now worth less than half of what Microsoft was willing to pay for the company in 2005 — have marginalized the search engine giant.

Analysts wonder if the Sunnyvale company’s recent announcement to sue Facebook for patent infringement is a last-ditch effort to scrape up slipping, elusive revenue. Intellectual property experts say Yahoo is hoping for a sizeable piece of Facebook’s advertising pie.

The Internet company claims Facebook’s good fortune is partially based on Yahoo technology. Yahoo contends Facebook’s online display advertising only improved after 2008, when the social media site adopted Yahoo’s advertising system.

Some experts believe Yahoo is desperate. The company is busy adjusting to a new CEO, who came on board three months ago. With the change of management came reports that Yahoo is contemplating the elimination of thousands of employees.

Meanwhile, Facebook continues to gain users and allies around the world and on Wall Street. The company is planning a whopping initial public offering later this spring.

One former Yahoo director saw the Facebook lawsuit as Yahoo’s last stand. Stockholders are loath to forget when Microsoft courted Yahoo with a more than $44 billion buyout bid. Yahoo turned down Microsoft and never reached a stock price of that proportion since.

Some analysts wonder, if the disputed patents are so magical, then why haven’t they worked to make Yahoo more successful? Once dominant, Yahoo fell to third place last year in advertising patent contracts behind Facebook and Google.

But the company’s fiscal shape is not up for debate in court. The court will need to decide if Yahoo actually has a case based on the merits.

Source: MercuryNews.com, “Yahoo stock fails to find traction in wake of Facebook lawsuit announcement,” Jeremy C. Owens, Mar. 13, 2012