Yahoo! Exercises Its Patent Muscle, Threatens Facebook

Struggling online giant Yahoo! this week demanded that social networking giant Facebook pay licensing fees for technologies that it's using and that Yahoo! owns. And if Facebook doesn't pay up, Yahoo! says it has no choice other than legal action to protect its intellectual property.

Hey, it works in the mobile-device market.

"Yahoo! has a responsibility to its shareholders, employees, and other stakeholders to protect its intellectual property," a Yahoo! statement reads. "We must insist that Facebook either enter into a licensing agreement or we will be compelled to move forward unilaterally to protect our rights."

Facebook confirmed the action, which was first reported by The New York Times.

"Yahoo! contacted us at the same time they called the New York Times, and so we haven't had the opportunity to fully evaluate their claims," a Facebook representative said.

According to the New York Times report, the Yahoo! complaint centers on 10 to 20 Yahoo!-patented technologies that the firm says Facebook is using. Many of the patents appear to have come from a 2003 Yahoo! purchase of Overture Services, a search-advertising company. Yahoo! says that other web firms are already licensing the technologies, but it hasn't named them.

The charge comes at a tough time for Facebook, which is gearing up for its potentially historic initial public offering. But that might be the point: This is an excellent time to get Facebook to agree to terms and put this issue behind it.