Yahoo surprised no one by suing Facebook for infringing 10 patents on Monday. The one-time Internet giant had dropped hints in the media for several months, and seems to have timed its litigation when Facebook is at its most vulnerable.
Observers were divided over whether Yahoo’s lawsuit had merit, with some – including a former board member – saying the company was making a last ditch effort to stay solvent.
“Pathetic and heartbreaking last stand for Yahoo,” former Yahoo board member Eric Hippeau tweeted. “It’s all over. I loved you very much.
There was, however, consensus that Yahoo picked the best possible time to file its lawsuit in federal court if its looking to force an out-of-court settlement. The potential Yahoo lawsuit was among the liabilities Facebook listed in an documents filed with the Securities and Exchange Commission last week.
“As a general proposition, when a company is about to go public, the last thing it needs is to get involved in a knock-down, drag out litigation fight,” Colleen Chien, a professor at Santa Clara Law in Silicon Valley, told Reuters. “So that might make Facebook more willing to resolve its differences with Yahoo.”
Yahoo has been successful using the tactic before. In 2004, it squeezed a settlement out of Google nine days before the company went public. Google later took a charge of $201 million to cover the settlement.
“Facebook probably will have a pretty good chunk of cash [following the IPO],” Clark S. Stone, a patent expert with the law firm of Haynes and Boone, told CNET. “You’ve got to assume that unless it’s some kind of grudge match with bad blood running, then there typically is some sort of business strategy behind this.”
For now, Facebook says it will defend itself against the lawsuit.
“We’re disappointed that Yahoo, a longtime business partner of Facebook and a company that has substantially benefited from its association with Facebook, has decided to resort to litigation,” Facebook spokesman Larry Yu said in an email. “Once again, we learned of Yahoo’s decision simultaneously with the media. We will defend ourselves vigorously against these puzzling actions.”
The company declined to comment on the specifics of Yahoo’s claim.
The timing may also reflect the naming of Yahoo’s new CEO. Scott Thompson has been on the job for just two months and its safe to assume he had a hand in the decision to push forward with litigation. Yahoo retained Quinn Emanuel Urquhart & Sullivan to represent it in the litigation, which is the same firm that represented Google in a series of similar patent infringement lawsuits that swept through the smartphone and tablet marketplace.
“Unfortunately, the matter with Facebook remains unresolved and we are compelled to seek redress in federal court,” Yahoo said in a statement. Yahoo had initially claimed infringement of 13 patents.