updated 01:30 am EST, Tue February 28, 2012
Search giant may be turning to patents for income
Following the case made by a hedge fund manager late last year, Yahoo has begun threatening social media giant Facebook, with whom it partners or some ventures, over ad, website and messaging patents. The search engine, which has struggled in the changing internet search and advertising arena, may be moving to make its vast holdings of early internet patents a key fixture of its future profitability, The New York Times reports.
Yahoo sent out a statement saying "we must insist that Facebook either enter into a licensing agreement, or we will be compelled to move forward unilaterally to protect our [intellectual property]." Facebook has so far responded by saying that Yahoo publicized the threats at the same time that it first contacted Facebook about the matter, so the company "hasn't had the opportunity to fully evaluate [Yahoo's] claims."
The heart of the dispute is Yahoo's contention that Facebook is infringing on 10 to 20 patents concerning advertising, web personalization, social networking and messaging technologies. While patent disputes are now common in technology circles, particularly among mobile technology companies, high-profile fights involving social-networking sites have so far been rare.
Like Kodak, Yahoo may feel that its rich patent portfolio, much of which it acquired in the early days of the commercial Internet and more acquired later from its 2003 purchase of search-advertising company Overture Services, may hold the key to monetizing the company in the short-term or increasing its value for a potential sale. Yahoo's timing on the issue is somewhat suspect, coming as it does just weeks before Facebook is expected to go public with a stock offering.
Independent analysts and publications have cited Yahoo's patents as among its most valuable assets. While the exact number and true worth of the patents are unknown, the portfolio's over 1,000 patents is of such worth that it could be sold separately of any sale of the business, or would dramatically increase the value of present-day Yahoo, which has seen its core businesses largely surpassed by Google and even its main partner, Microsoft's Bing engine.
Ironically, one of Yahoo's few areas of growth in recent months has been a deal it worked out with Facebook. The latter company now integrates Yahoo News into Facebook in a feature that notifies users of Yahoo articles read by their friends. Links to the articles are said to have more than tripled Yahoo's daily traffic over the past six months, according to a blog posting in Facebook's developer channel.
Yahoo has been rocked in recent months with mediocre performance and departing executives, including co-founder Jerry Yang, who exited the company entirely last month after a tumultuous struggle with the former CEO and board over direction following an aborted Microsoft attempt at a buyout. Yang was swiftly followed by four board members, as well as the chairman of the company. The company has struggled with a flat stock price and low market capitalization.