Yahoo, Facebook and the Strategic Value of IP

The pending patent infringement battle between Yahoo and Facebook reveals why IP and patents are so important, and how they can be used to reap millions of dollars in the world of IT.

Yahoo recently dipped into its patent portfolio and, after discussions on patent licensing broke down, decided to sue Facebook over the infringement of 10 patents that are somewhat basic to social networking infrastructures. Many in Silicon Valley view Yahoo’s move as a desperate attempt to find novel ways to raise funds for a “ship that is already sinking.” Given the impending IPO of Facebook, some believe Yahoo saw an opportunity and tried to capitalize on it.

Yahoo said it has invested “substantial resources in research and development” that have led to technology patents that other companies have licensed.

As a young company, Facebook did not have much in the way of IP in their patent portfolio so Facebook’s purchase of 750 patents from IBM is a brilliant strategic move to Yahoo’s initial patent infringement suit and easily solidifies their defenses.

However, Yahoo has previously been successful with such tactics. In 2004 Yahoo made hundreds of millions of dollars from a patent settlement that it reached with Google nine days before Google went public. Google agreed to issue shares to Yahoo in exchange for licensing rights to Yahoo’s patents.

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