Yahoo hits Facebook with patent lawsuit

Yahoo is suing Facebook over patents, just weeks before the social-networking heavyweight is due to cash in with its initial public offering of stock.

Yahoo Inc. said in a court filing Monday that Facebook has infringed 10 of its patents covering advertising, privacy controls and social networking. Yahoo had threatened to sue Facebook last month, insisting that the social network license its patents.

Facebook vowed to defend itself vigorously against what it called "puzzling actions" by Yahoo.

"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 said in a statement. Yahoo ties a lot of its online services to Facebook, which has helped it attract users.

As with many patent suits, this one will likely be resolved in a settlement or licensing deal. That said, the patent claims could cast a spotlight on Facebook's vulnerabilities as the company tries to complete an IPO this spring.

At the end of 2011, Facebook had just 56 U.S. patents, a relatively small number compared with other big tech companies. Yahoo owns more than 1,000 patents.

That trove of patents may come in handy for Yahoo, which has seen its revenue fall steadily over the past three years. But it could also cast the company as desperate, trying to extract money from soon-to-be-public Facebook.

Yahoo used similar tactic before Google IPO

Yahoo made hundreds of millions of dollars from a patent settlement that it reached with Google Inc. just before the internet search leader went public in 2004. Facebook's IPO is expected to dwarf Google's, valuing the Menlo Park, Calif.-based social network at as much as $100 billion.

Yahoo defended its lawsuit, saying it has invested "substantial resources in research and development" over the years leading to technology patents that other companies have licensed. Its lawsuit says that without Yahoo's innovations, Facebook and other websites would not enjoy "repeat visitors or substantial advertising revenue."

Among other claims, the lawsuit says that Yahoo's patents cover basic social networking ideas such as customizing website users' experiences to their needs and interests. And it says that Yahoo's advertising patents cover ways of generating ads that relate to individual users, increasing revenue for website operators.

Sunnyvale, Calif.-based Yahoo filed the lawsuit Monday in federal court in San Jose, Calif. It is asking for unspecified damages and a jury trial.