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Summary:

In a widely expected move, Facebook and Yahoo have agreed to put aside a ruinous lawsuit that would have locked the two Silicon Valley giants into a lengthy patent throwdown.

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In a widely expected move, Facebook and Yahoo have agreed to put aside a ruinous lawsuit that would have locked the two Silicon Valley giants into a lengthy patent throwdown.

The news comes via Kara Swisher of AllThingsD who reports that the two firms will not only put sheathe their lawyers but also enter a wide-ranging content and advertising partnership.

The report says that the deal has been blessed by both companies’ boards and that no cash will change hands despite Facebook’s having shelled out $550 million to buy a patent portfolio from Microsoft.

The pact resolves a contretemps that began when Yahoo’s former CEO declared that Facebook’s social network was based on Yahoo’s technology and sued over ten patents. The lawsuit enraged many in Silicon Valley who accused Yahoo of fueling the tech sector’s runaway patent litigation, and led Facebook to launch a counter lawsuit.

The controversy began to die down after Thompson was driven out of the company in May after it emerged he had fabricated important parts of his resume.

The partnership appears to be a strategic win for Facebook. The company not only averted prolonged and costly court proceedings but also served notice on other companies that it will hit back hard against future patent lawsuits.

It remains to be seen if the experience will lead Facebook to keep its newly-acquired patent portfolio for defensive purposes or if it will instead use the patents to harass Google and other competitors.

Update: Facebook and Yahoo have finally issued a press release that contains the expected platitudes about integration, working together and so on. Here are quotes from senior executives:

“We are excited to develop a deeper partnership with Facebook, and I’m grateful to Sheryl and her team for working hard together with our team to develop this dynamic agreement. We are looking forward to building on the success we have already seen to provide innovative new products and experiences for both consumers and sponsors,” said Ross Levinsohn, interim CEO of Yahoo!. “Combining the premium content and reach of Yahoo! as the world’s leading digital media company with Facebook provides branded advertisers with unmatched opportunity.”

“I’m pleased that we were able to resolve this in a positive manner and look forward to partnering closely with Ross and the leadership at Yahoo!,” said Sheryl Sandberg, Chief Operating Officer at Facebook. “Yahoo!’s new leaders are driven by a renewed focus on innovation and providing great products to users. Together, we can provide users with engaging social experiences while creating value for marketers.”

(Image by Marcel Jancovic via Shutterstock)

  1. It’s interesting to see Yahoo! not pursue Facebook with its patents. Although perhaps after their lawyers looked at the patents they realized it was a wasted effort.

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