Patents: Where will the dust settle after Yahoo and Facebook have fought it out?

26 March 2012

Late nights for Facebook’s legal team in the wake of Yahoo! filing a suit against the social network claiming that it operates in breach of ten patents held in Yahoo’s portfolio.

Outsiders were quick to note that Yahoo didn’t seem to have a problem with Facebook’s technology until very recently, many going so far as to speculate that Yahoo’s decision to go to court may have less to do with defending intellectual property and more to do with securing a settlement paid in equity before Facebook goes public later this year.

As well as underscoring the importance of patenting innovations at the first possible opportunity, Yahoo’s claim raises interesting questions about whether current software patenting regimes (both in the UK and US) are viable in the longer term.

What exactly does Yahoo have the rights to?

A quick look at the ten patents that underpin Yahoo’s claim indicates that, prima facie, it has the rights to patents which enable Facebook features as diverse as placing targeted adverts on user’s profile pages, ‘liking’ posts/entities, sending instant messages to other users’ message inboxes, and previewing how privacy settings will look to others.

If Yahoo really does have such rights over those intellectual properties, then it may be that it could launch similar proceedings against an innumerable other tech companies; for example, every service with an equivalent of the ‘like’ feature, or that uses targeted adverts. That’s a prospect which is made particularly worrying by virtue of the fact that Yahoo can do so without having to demonstrate that it actually uses the patents it holds (it doesn’t, for example, have to show that it operates its own social networking service which Facebook imitates).

That’s not a position which is unique to Yahoo; companies such as Microsoft and Google also own sizeable portfolios of registered patents which could be used for similar litigation if they wished. The only factors that prevent them from acting in that, what might perhaps be called abusive, fashion are commercial rather than legal; which raises the question of whether it’s realistic to continue to work with such a patent system.

How to debug the patent system?

Given that software patents are, by their very nature, descriptive rather than definitive (unlike, say, pharmaceutical patents for chemical formulas) it’s not unfair to question whether the current system is the best option for policing intellectual property in the area.

Suggestions for reform range from minor tweaks, such as calling for software patents to be more specifically defined, to more drastic measures, such as providing for patents unused by their holders to lapse after short time-spans. More radically, some commentators (such as web entrepreneur and former Yahoo employee Andy Baio) have called for software patents to be scrapped altogether, leaving the market regulated solely by copyright.

Proposals aside, what is clear is that the sheer scale of the Yahoo litigation is likely to attract the attention of legislators on both sides of the Atlantic, especially in the event that it is successful. That means that its outcome is likely to have implications not just for Facebook’s future share price, but also for the intellectual property rights of the software industry as a whole.

Share insightLinkedIn Twitter Facebook Email to a friend Print

Email this page to a friend

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

Leave a comment

You may also be interested in:

Skip to content Home About Us Insights Services Contact Accessibility