Déjà Hoo: Yahoo Has Done the Pre-IPO Legal Shakedown Dance Before
A hot Internet company poised for an even hotter IPO is attacked in court by a competitor whose lunch it has been eating.
Sound familiar? Actually, it’s just as much Google in 2004 as Facebook yesterday.
What the pair have in common is Yahoo, for whom this kind of patent infringement lawsuit is a whole lot of been there, done that.
In Google’s case, Yahoo was suing the then-smaller company over search patents from its Overture acquisition. The pair settled 10 days before the Google IPO, with Yahoo getting 2.7 million more shares of that stock, which it then sold off relatively quickly.
As part of the settlement from a lawsuit started in 2002, Google licensed U.S. Patent No. 6,269,361, entitled “System and method for influencing a position on a search result list generated by a computer network search engine,” which was owned by Yahoo Overture subsidiary.
In plain terms, the patent was over its key pay-for-performance service, which was at the heart of Google’s business of allowing bidding for search results placement related to relevant keywords.
In Facebook’s lawsuit, Yahoo is alleging intellectual property violations by the social networking giant, and is also taking credit for Facebook’s success.
The 19-page lawsuit over 10 patents — related to advertising, privacy, customization, messaging and social networking — comes as Yahoo is seeking to right itself under new CEO Scott Thompson.
“Facebook’s entire social network model, which allows users to create profiles for and connect with, among other things, persons and businesses, is based on Yahoo’s patented social networking technology,” Yahoo’s lawsuit reads, in part.
(Cue the movie script: If Yahoo had invented Facebook, it would have invented Facebook.)
That includes, Yahoo alleges, Facebook’s popular News Feed, advertising methods, privacy settings and more. The company adds that Facebook has been “free riding” on Yahoo’s intellectual property, and that royalty payments alone will not suffice.
What happens next today will be interesting — way back when, Google finally gave in in the delicate game of chicken with Yahoo, at the last minute.
But it’s not clear whether Facebook will flinch — or not.
Until we find out, here’s the press release from the 2004 settlement between Yahoo and Google to peruse:
Yahoo! and Google Resolve Disputes
SUNNYVALE, CA & MOUNTAIN VIEW, CA — August 9, 2004 – Yahoo! Inc. (Nasdaq: YHOO) and Google Inc. today announced that the companies have resolved two disputes that have been pending between the companies.
Under the terms of the settlement agreement, Google will take a license to U.S. Patent No. 6,269,361 and several related patents, held by Yahoo!’s wholly-owned subsidiary, Overture, and Yahoo! dismissed its patent lawsuit against Google. The two parties have also resolved a dispute regarding shares issuable to Yahoo! pursuant to a warrant to purchase Google shares in connection with a 2000 services agreement.
In connection with the settlement of the warrant dispute, the patent lawsuit, and in payment for the license, Google issued shares of its Class A common stock to Yahoo!.