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Let the Games Begin – Yahoo Slaps Facebook With Patent Fees

Biting the hand that feeds it, Yahoo slapped Facebook with a demand for fees on 10 to 20 patents, threatening to sue if the social media company failed to comply.

The patents cover technologies that cover social networking, advertising, and the personalization of websites. The patents include some of the earliest granted to Yahoo. The New York Times was the first to break the story.

“Yahoo has a responsibility to its shareholders, employees and other stakeholders to protect its intellectual property,” a Yahoo spokesman said in an e-mailed statement. “We must insist that Facebook either enter into a licensing agreement or we will be compelled to move forward unilaterally to protect our rights.”

The two companies met to discuss the issue, but Yahoo approached the New York Times before bringing the matter to Facebook, representatives for the social media company contended.

“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 spokesman said.

The move comes at a time when Facebook filed for an IPO that could value the company at $100 billion, and when Yahoo strives for a better revenue model. The company recently brought on board a new CEO, Scott Thompson, who was charged with finding the media company additional revenues.

Patent wars are common disputes in the tech world. Google paid $1.25 billion to Motorola Mobility last year over a patent suit. Nortel been paid more than $4.5 billion for its patents by Google and Microsoft.

Reactions to the move in the venture community were critical.

“Yahoo is now a patent troll,” Tweeted venture capital investor Brad Feld. “How profoundly disappointing.”

Nonetheless, Yahoo may have a leg to stand on. Eric Johnson, a managing member of the Ironfire Capital hedge fund, argued in the November Forbes that Yahoo should do exactly what it’s doing.

“The internet space has patents and they could be the next big land grab area that few have bothered to pay attention to,” Johnson wrote. “And it turns out that Yahoo! has quite of few of these patents and they’re very valuable.”

Though no dollar amount has been pegged by Yahoo in its claims, Johnson reasons the company should seek no less than $3 billion.

Money doesn’t grow on trees, unless you’re Facebook, in which case it’s ripe for the picking.

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