July 6, 2012

Yahoo and Facebook settle patent brawl

Facebook and Yahoo are officially friends again. The two companies said Friday that they have settled the patent lawsuit Yahoo filed against Facebook four months ago, in a "strategic" deal that includes no cash.

In March, Yahoo filed a lawsuit alleging that Facebook infringed on 10 of its patents related to advertising, privacy, customization, messaging and social networking.

Facebook fired back hard at the surprise move. Its reply a few weeks later included counterclaims against Yahoo for allegedly breaching 10 Facebook patents, including ones related to photo-sharing and content personalization.

The companies are now reversing course and signing a peace treaty.

Their patent cross-licensing deal also includes a "new" advertising partnership, but the press release announcing the alliance was light on specifics and laden with corporate-speak about "collaboration" and plans to work more closely together on "tent-pole and anchor events."

Yahoo's decision to wage a patent battle with Facebook was the first big strategic step for then-CEO Scott Thompson, who took the helm in January.

It wasn't a popular one. Critics saw the move as a desperate attempt by Yahoo to shake cash out of a younger, hotter rival. Facebook immediately called the suit "puzzling" and "disappoint[ing]."

Thompson, who spearheaded the lawsuit, didn't last long enough at Yahoo to see the case through to its end. He was ousted in May after just four months on the job in the wake of a scandal over his embellished college degree.

Once Thompson was out, Yahoo executives moved quickly to broker a settlement. Yahoo veteran Ross Levinsohn, who stepped into the interim CEO role and is reportedly a leading contender to keep the job permanently, reached out to Facebook COO Sheryl Sandberg to negotiate the peace treaty, according to AllThingsD.

Meanwhile, Facebook snapped up some extra patents of its own. In April Facebook spent about $550 million to buy about 650 patents from Microsoft, which itself had purchased those patents from AOL two weeks earlier.

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