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The patent war between Yahoo and Facebook is over. The two companies not only settled the suit but extended the multiyear partnership between the two, including new deals for advertising.

The conflict began in March when Yahoo accused the social network of infringing on 10 of its patents. These included patents concerning displaying content, messaging users, controlling spam, and other topics. Facebook then returned with a countersuit Yahoo was actually infringing on 10 of Facebook’s patents. And Facebook went to the trouble of naming each offending Yahoo product, such as Yahoo’s home page, Flickr, and Yahoo Finance.

In June, Yahoo’s counsel requested an extension to respond to Facebook’s claims, saying that the extra days would help Yahoo and Facebook come to a settlement.

According to All Things D, today’s settlement includes a new advertising agreement, which will allow Yahoo to pull Facebook’s “like” data and display it on ads on Yahoo. Yahoo interim chief executive Ross Levinsohn and Facebook chief operating officer Sheryl Sandberg facilitated the deal. Both companies have also agreed to license some of the offending technology to each other. Facebook explained in a press release that it will help Yahoo with “large media event coverage” by integrating it on the social network.

The two companies have been involved for a long time now, with a “multiyear contract” that allowed Yahoo to use Facebook as a way to distribute content from its site. Yahoo then supported Facebook’s “Social Bar” on its sites, which Facebook says 90 million people have used.

The lawsuit, which began under Yahoo’s former chief executive Scott Thompson, looked like a last-ditch effort on Yahoo’s part to get money. The company has had a number of pitfalls as it tries to stay afloat in a new media industry. The company recently began laying off 2,000 employees and had plans to restructure. But Thompson who was behind many of these plans, was ousted as CEO in May after he was found lying about a computer science degree on his resume.

via All Things D; Image via Mark Zuckerberg/Facebook

Filed under: social

Facebook and Yahoo are calling off their heated patent lawsuit battle, and in fact have just agreed to cross-license their entire patent portfolios to each other without money changing hands, sources directly familiar with the deal tell me. Sources also confirmed that the two web giants are entering into an ad sales partnership that will let Yahoo show Like buttons in its ads, as first reported by Kara Swisher of AllThingsD this morning.

Update 1:15pm PST 7/6: Facebook has just confirmed the full patent portfolio cross-license agreement as well as the ad sales and distribution partnership in a press release.

However, Swisher noted the companies would only cross-license “some key patents”, and Facebook might have to pay to license others from Yahoo. The patent deal is actually much larger. It encompasses their entire intellectual property stockpile such that they won’t have to pay be able to use each other’s patents, and won’t be able to sue each other over them either.

In the press release Facebook confirms:

“Yahoo! (NASDAQ: YHOO) and Facebook (NASDAQ: FB) today announced that they have entered into definitive agreements that launch a new advertising partnership, extend and expand distribution arrangements, and settle all pending patent claims between the companies.”

Regarding the ad partnership, Facebook’s COO Sheryl Sandberg explained “Combining the premium content and reach of Yahoo! as the world’s leading digital media company with Facebook provides branded advertisers with unmatched opportunity.”

Today’s revelations should bolster investor confidence in both companies going forward, though Yahoo’s may have hoped for a big pay-out from Facebook.

A Mutually Beneficial End To The Patent War

Yahoo sprung the lawsuit on Facebook in the months leading up to its IPO in a move Swisher says was spearheaded by disgraced former CEO Scott Thompson. It sought to extort a massive settlement from Facebook before the IPO so it could avoid potential investors holding back in worry of the case’s outcome.

But rather than settle Facebook bought huge stores of patents from AOL / Microsoft and IBM and countersued with 10 patents, the same number it was sued by Yahoo with. I judged many of Facebook’s patents to be more concrete than Yahoo’s, setting up a formidable defense. That defense seems to have worked.

Swisher reports that interim CEO Ross Levinsohn reached out to Facebook COO Sheryl Sandberg after Thompson was deposed in hopes of coming to an agreement.

Today that agreement sees Facebook emerging without having to pay any direct settlement, though it did spend hundreds of millions of dollars on the patent caches to defend itself.

New Ad Sales and Content Partnerships

The ad sales partnership centers around the two companies working together to secure big ad buys and spread placements across their properties. This way, if say Ford was having a massive launch for a new car, Facebook and Yahoo could help the auto-maker distribute ads across Facebook.com, Facebook’s mobile site, and all of Yahoo’s news sites, portals, and utilities for maximum impact.

In the press release, Facebook explained:

“Yahoo! and Facebook will also work together to bring Yahoo!’s large media event coverage to Facebook users by collaborating on social integrations on the Yahoo! site. Going forward, Yahoo! and Facebook have agreed to work more closely and collaborate together on multiple tent-pole and anchor events annually over the next several years to provide unparalleled experiences for consumers and world-class sponsorship opportunities for advertisers.”

Facebook and Yahoo worked together on ads in during the social network’s early days, but haven’t had a sales partnership in place for years.

Sources tell me there will be some new partnership around allowing Yahoo to include Like buttons in their ads, but details haven’t been hammered out yet. That could let Yahoo sell ads for brands hoping to score more Likes (essentially subscriptions to news feed marketing messages) for the Facebook brand Pages.

Meanwhile, the long-standing contact sharing partnership between Yahoo and Facebook will continue, sources confirmed. It allows users that sign up for Facebook to automatically import that Yahoo Mail address book to make it easy to find and become friends with those they email with. Facebook and Google once had a similar partnership for allowing contact importing from Gmail, but Google famously cut it off because Facebook wouldn’t allow users the “data portability” to export their friends’ email addresses.

A Second-Chance For Yahoo

The ongoing patent battle was costly, both in dollars spent and attention fractured. Today’s agreement will help the two avoid big legal fees and let them concentrate on innovating, rather than who owns the rights to vague concepts around social networking and advertising.

The new ads partnership could help Yahoo, whose sales have been ailing. Last year, Yahoo signed a big ad sales partnership with AOL and Microsoft to allow them to sell placements on each other’s properties. Thanks to this new alliance with Facebook, Yahoo can now more firmly concentrate on beating Google…something Facebook is sure to be OK with.

However, Thompson promised Yahoo directors a huge pay out from a Facebook settlement — and that’s not what happened. Instead, Yahoo critically damaged its reputation by going on the patent offensive. And since today’s agreement comes with no pot of gold passed from Yahoo to Facebook, Thompson’s attack has proven much less fruitful than expected. Now eyes will be on Wall Street, which may boost Facebook for emerging without giving up a massive settlement, and may ding Yahoo for failing to produce a pay-day.

Stuxnet showed us the potential for great damage with an attack on infrastructure. Now, a new piece of malware is taking the attack a step further: it’s stealing the plans for your infrastructure, maybe even before it’s built.

“I think every public organization should be concerned about this,” said ESET security intelligence program manager Pierre-Marc Bureau in an interview with VentureBeat. “When you’re starting to see some serious attempts at stealing intellectual property from one country to another, that’s something to be concerned about.”

Security firm ESET discovered the malware, now called ACAD/Medre.A, around February and noted it was “military-grade.” The worm attacks AutoCad, a popular piece of software used by architects and engineers to draw up blue prints and other infrastructure plans. It targets computers running the Windows operating system to steal and e-mail out AutoCad “drawings.” These drawings are then received by an e-mail that ESET found to be based in China.

Attacking infrastructures is the next great frontier for network security. Stuxnet, Duqu, Flame and others which have not yet discovered are developed to hit where it really hurts: our physical modes of operation. But as any company locked in a patent lawsuit can tell you, stealing intellectual property can be just as damaging. Especially when that IP includes blueprints and plans for the construction of bridges, secretive or government-owned complexes, or energy infrastructure.

The catch with this piece of malware is that it’s not heavily attacking the United States, Europe, or China, but rather in Peru. It’s an odd location, which leads Bureau to believe the malware was probably written by people who wanted to see what their competition was up to. It could be an attempt to one-up a competing agency for a new business pitch, or other similar situations.

He did stress, however, that this malware is too complex to be written by any old cyber criminal wannabe. According to him it isn’t as complex as say, Stuxnet, which shut down fuel to Iran’s nuclear program in 2010, but it does have the potential to spread faster and wider. Bureau says this is probably not a state sponsored attack, however, given that Peru is being hit the hardest with this.

“[The culprit is] either for somebody who wants to bid on public service contract, maybe know what their competition is doing, or they’re trying to find the system for building these things,” said Bureau.

Despite the fact that this malware could simply be an act of competition, the implications are obviously damaging and Bureau warns that governments and security teams should remain aware. He summed it up saying:

“I think this is pretty serious and a good example of a trend that is going to continue for the next months and years.”

Blueprint image via Shutterstock

Filed under: security

Yahoo, who is suing social network Facebook over patents, requested more time from the courts before being forced to reply to Facebook’s claims in the lawsuit. The reason? The two companies are attempting to settle.

“The parties are currently engaged in settlement negotiations to resolve this dispute. The parties believe that a further extension will facilitate settlement,” said Yahoo counsel Kevin Smith in an amendment to the filing. “Yahoo and Facebook are in agreement that additional time is warranted for the parties to prepare their submissions, will not adversely affect the case schedule, and will facilitate a settlement.”

The extension was filed yesterday.

The two companies have been wrapped up in the lawsuit since March, when Yahoo claimed Facebook was infringing on 10 of the company’s patents. These patents pertained to displaying content, messaging users, controlling spam, and others. Facebook, in return, filed a counterclaim saying that it was Yahoo who was infringing on 10 Facebook patents. Indeed, Facebook even named off each offending product:

“Yahoo! infringes the Facebook patents-in-suit through, by way of example and not limitation, the Yahoo! Home Page, Yahoo!’s Content Optimization and Relevance Engine (“C.O.R.E.”), the Yahoo! Flickr photo sharing service, and advertisements displayed throughout Yahoo! including on My Yahoo!, Yahoo! Finance, Yahoo! Sports, Yahoo! News, Yahoo! Games, Yahoo! Movies, Yahoo! Shopping, Yahoo! Travel, Yahoo! Autos, and Flickr.”

The two companies may be closer to settlement now that former Yahoo chief executive Scott Thompson is out of the picture. He was said to be a driving force behind the lawsuit, but was ousted after a scandal involving a faked computer science degree. Yahoo will now have to respond to Facebook’s counterclaims on July 5, extended from June 20. It will have to reply to Facebook’s motion to dismiss the case on July 26.

via Bloomberg; Yahoo image via Yodel Anecdotal/Flickr

Filed under: VentureBeat

Google just put another win under its belt in the Google-Oracle patent lawsuit, that looked to be wrapped up when a jury found Google not guilty of infringing on Oracle’s patents earlier this month.

In the first part of the trial, which focused on copyrights held by Oracle, a jury found that Google had infringed on Oracle’s structure, sequence, and organization (SSO) of its application programming interfaces (API). At the time, Judge William Alsup said he was reviewing Oracle’s claim to copyright an SSO, but requested that the jury consider it copyrighted. Now, the judge is reversing the jury’s decision saying that Oracle doesn’t have the right to copyright the SSO of an API.

In essence, letting Oracle win this one is to say that competing technologies are not allowed come up with a similar structure to their APIs, lest they be subjected to a copyright lawsuit.

“To accept Oracle’s claim would be to allow anyone to copyright one version of code to carry out a system of commands and thereby bar all others from writing their own different versions to carry out all or part of the same commands,” said Alsup in a statement. “No holding has ever endorsed such a sweeping proposition.”

Oracle will appeal the decision and has released the following statement:

Oracle is committed to the protection of Java as both a valuable development platform and a valuable intellectual property asset. It will vigorously pursue an appeal of this decision in order to maintain that protection and to continue to support the broader Java community of over 9 million developers and countless law abiding enterprises. Google’s implementation of the accused APIs is not a free pass, since a license has always been required for an implementation of the Java Specification. And the court’s reliance on “interoperability” ignores the undisputed fact that Google deliberately eliminated interoperability between Android and all other Java platforms. Google’s implementation intentionally fragmented Java and broke the “write once, run anywhere” promise. This ruling, if permitted to stand, would undermine the protection for innovation and invention in the United States and make it far more difficult to defend intellectual property rights against companies anywhere in the world that simply takes them as their own.

via The Verge; Image photoshop by Tom Cheredar

Filed under: VentureBeat

Oracle’s Larry Ellison has acquired a reputation as a cloud computing opponent — after all, he famously called the term “complete gibberish” a few years ago. Today, however, he said, “I’m no longer resisting the name. Call it what you want.”

In fact, Ellison made it sound like he doesn’t get enough credit for starting the trend: “NetSuite was my idea. I called up Evan Goldberg and said, ‘We’re going to do ERP on the Internet.’” That, he said, was an early example of software-as-a-service, and Salesforce.com co-founder Marc Benioff (who has worked to tie his company’s identity to the cloud) copied the idea a few months later, but “in a narrow way.” (Apparently this got a smirk out of Benioff, who was in the audience.)

Ellison said he still objects to some aspects of the interest in the cloud, specifically, the idea that “there’s this incredible new thing called cloud computing,” prompting companies that have been around for a decade to say, “Yeah, that’s us!” Instead of painting cloud computing as something completely new, Ellison said it’s more accurate to think of it as “a continuous, step-by-step evolution.”

“I like the word,” Ellison said. “I objected to some people saying it was new. I like it because it’s a charismatic brand for the next generation of computing.”

Another hot topic for Oracle: The number of lawsuits that it’s currently involved in. Ellison said he didn’t want to talk about any of them, since they’re still being litigated, but on the lawsuit against Google, which seemed to end largely in Google’s favor, Ellison argued that it’s more a copyright lawsuit than a patent lawsuit. Why the distinction? Well, as Ellison noted, on the question of copyright infringement, “We won.”

Ellison is one of the tech world’s larger-than-life figures (for example, he’s supposed to be one of the inspirations for Robert Downey Jr.’s portrayals of Tony Stark in the Iron Man movies), but interviewer Kara Swisher also asked Ellison if there are any big misconceptions about him. He resisted the question at first, but eventually said that people are sometimes surprised when they meet him in person.

“It’s a low bar,” Ellison said. “I didn’t bite the head off a small animal during the meeting.”

More developments in the world of mobile patents, and mobile advertising, as it happens: mobile marketing company Augme Technologies has purchased five patents covering mobile VoIP and other technologies, and a further 25 related patent applications, which it says it will use to spearhead its move into new services — and the legal defense of existing ones. The move comes as mobile VoIP services continue to grow in prominence thanks to companies like Skype, Twilio and the profusion of smartphone apps that offer internet-based calling services. Separately, Augme is currently in the middle of a patent lawsuit against Millennial Media.

Augme is buying the IP from content distribution company Geos Communications, with the financial terms of the deal undisclosed. The acquisition brings Augme’s IP portfolio up to 14 issued patents and more than 60 pending patents in the U.S. and internationally.

For now, it does not appear that these patents are not the subject of any legal heat — we have contacted Geos to confirm that — but we’ll have to wait and see what happens next. Augme says that it has over 2,000 claims in the telecom, media and Internet space already, and that its IP strategy is to focus on licensing. (It recently inked its first licensing deal, with LucidMedia.) The newly acquired patents will enhance Augme’s IP business model and expand its domestic and international applications.

Augme “remains committed to the vigorous defense of its intellectual property rights,” according to Augme’s CTO Nathaniel Bradley.

On the other side, it looks like the patents will be put to use directly in products. That’s because Augme — like its competitors — is trying to create more enhanced (and therefore potentially more monetizable) mobile marketing services. Specficially, Augme says the IP can help it offer more services within its AD LIFE and AD SERVE mobile marketing/advertising platforms, which already include features like SMS, MMS, 2D/QR codes, mobile websites, advertising networks, social media and branded apps as offerings. Augme retails these services under the brand Hipcricket, which it bought in August 2011 for $44.5 million. It has run some 175,000 campaigns for a client base that includes Macy’s, MillerCoors, Nestle and Clear Channel.

The patents bought today have suitably general-sounding descriptions. Patent 7,606,217 is for a ”System and method for routing telephone calls over a voice and data network”. Patent 7,460,480 is for “Dynamically adapting the transmission rate of packets in real-time VoIP communications to the available bandwidth”. Patent 7,676,599 is for a “System and method of binding a client to a server”. Number 7,782,878 covers a “System and method for sharing an IP address”. Finally, 7,957,401 is for a “System and method for using multiple communication protocols in memory limited processors.” The additional applications for patents — seven in the U.S. and 18 international applications — all related to mobile VoIP, the company says.

Facebook just posted a fith amendment to its IPO filing, confirming the price range for its stock at IPO, how much it will raise, and noting the future threat of patent lawsuits from Yahoo over hardware in Facebook’s Open Compute Project. The company is selling 180,000,000 shares of Class A common stock and is pricing them at $28-$35. That means they’re raising between $5  billion and $6.3 billion. On top of that, existing shareholders are selling 157,415,352 shares.

Here’s the excerpt:

Facebook, Inc. is offering 180,000,000 shares of its Class A common stock and the selling stockholders are offering 157,415,352 shares of Class A common stock. We will not receive any proceeds from the sale of shares by the selling stockholders. This is our initial public offering and no public market currently exists for our shares of Class A common stock. We anticipate that the initial public offering price will be between $28.00 and $35.00 per share.

This confirms the earlier pricing that we posted about today. We had a more specific range than The Wall Street Journal or The New York Times, saying the price was at $27-$35. We were off by a dollar, but they said ‘high 20s to mid 30s’ in their original stories.

Facebook has already been fighting Yahoo over patents, and had to spend more than a half-billion dollars to pick up patents from Microsoft in defense. Facebook notes that it received a letter from Yahoo warning that technology used in Facebook’s Open Compute Project hardware may violate 16 Yahoo patents.

Here’s what Facebook said in the S-1:

“Yahoo could in the future assert additional patent or other claims against us in this or in other proceedings. For example, we received a letter dated April 23, 2012 from Yahoo indicating that they believe 16 patents they claim to hold “may be relevant” to open source technology they allege is being used in our data centers and servers. Yahoo has not threatened or initiated litigation with respect to matters described in this letter but it may do so in the future.”

That letter is embedded below. Facebook’s response to the letter from Yahoo is:

“Yahoo’s letter takes aim not just at Facebook but at open source and energy-efficient green technologies developed and employed by countless innovative, forward-thinking companies and engineers. We’re defending vigorously against Yahoo’s current lawsuit, and would likewise do so against any new assertions.”

This all means that even if Facebook’s escapes the current 12-patent infringement lawsuit from Yahoo, it won’t be in the clear. Yahoo won’t either, though. This letter stating Yahoo’s possessions of proprietary server patents related to technology in Facebook’s eco-friendly open source initiative could further tarnish its name and lead more to call it a patent troll and enemy of innovation.

Facebook had a choice to make: With just 56 patents to its name at the start of 2012 it could pay its way out of Yahoo’s infringement lawsuit with gobs of money and remain vulnerable to other patent attacks, or make a long-term investment into an intellectual property portfolio it could protect itself with for years to come. Facebook has wisely taken the second path, upping its patent stockpile to over 1400 with today’s $550 million cash purchase and licensing of 650 AOL patents from Microsoft today. These new patents cover email, instant messaging , web browsing, search, ads, mobile, and ecommerce according to a source with direct knowledge of the purchase.

Surely, Facebook might have gotten better deals on this cache from Microsoft and the package of 75o patents it bought from IBM had it not been so desperate, but better late than never. Now with a healthy patent portfolio that I breakdown below, Facebook may be able to stop scrambling to buy IP, and can fend off the attack of any who would spoil and suck money from its IPO.

Really, Facebook should have predicted a patent lawsuit onslaught and beefed up its defenses a year ago. Riding boldly towards an IPO with such a tiny IP portfolio was brash, and perhaps too trusting. It had bought a few patents here and there from companies like HP, Friendster, BT, and Halliburton, but publicly only held around 60 issued patents as of a few months ago. Maybe it thought other tech giants would have more scruples, but it was essentially piling $100 billion+ in value into a rickety rickshaw rather than an armored car.

Lucky for it, though, Yahoo attacked just a bit too early, announcing it would sue Facebook  over ten mostly vague patents around social networking, communication, privacy, and advertising in mid-March. Facebook snapped into action, buying 75o patents from IBM March 22nd. Because these were purchased in a state of emergency, IBM may have been able to command a higher price than it could have in times of peace, but Facebook had its back against the wall and had limited time and options.

Come April, Facebook filed a masterful countersuit against Yahoo with ten patents invented by its employees including Mark Zuckerberg and a former Yahoo employee and that it had bought from academia and entrepreneurs. It was a cunning move that offset Yahoo’s attack while still making Facebook look like the victim.

Regarding Facebook’s Microsoft patent buy, Yahoo gave us the statement:

“Nothing about today’s action changes the fact that Facebook continues to infringe our patents.  Companies who purchase patents are often working from a position of weakness and take these actions to strengthen their portfolio. We see today’s announcement as a validation of our case against Facebook.” 

Facebook likely had to overpay again, this time sending $550 million in cash to Microsoft for 650 of the 925 patents it bought last week from AOL (who owns TechCrunch) for $1 billion. Microsoft struck a great deal, as it will retain a license to all the patents it sold to Facebook.

The purchases are not likely to change Facebook defensive stance on patents, but its healthy portfolio and tough response to the Yahoo attack should deter future trolls. Facebook’s total portfolio of roughly 1461 patents that we’re aware of now breaks down as such:

• 56 U.S. issued patents as of December 31, 2011 that it cited in the S-1 from employees and purchases, and 33 foreign patents
• 503 pending U.S. patent applications and 149 foreign patent applications cited in the S-1
• Roughly 5 patents purchased from NYU Professor Alexander S. Tuzhilin and San Jose entrpreneur Chris Cheah
• 750 patents from IBM
• 650 patents from Microsoft, formerly owned by AOL
• Any patents attained in its recent acquisitions of Instagram and TagTile

At this point, Facebook has likely built its walls high enough and may not make any other massive IP purchases in the near future. Now investors can confidently buy into the social network’s IPO, knowing Facebook has a thick suit of armor and a sword of its own for the next time someone tries to stab it in the back.

[Image Credits: GameJoom, Jeff Scarterfield, Kqube] Updated to indicate what the patents bought from Microsoft cover.

Steve Ballmer facebook

This is breaking news, refresh for updates.

Ina Fried is reporting that Facebook is paying Microsoft $550 million for access to 600 patents. Facebook is facing a patent lawsuit from Yahoo and is expected to IPO in May 17th.

Microsoft has issued a press release:

REDMOND, Wash. and MENLO PARK, Calif. — April 23, 2012 — Microsoft Corp. and Facebook announced today a definitive agreement under which Microsoft will assign to Facebook the right to purchase a portion of the patent portfolio it recently agreed to acquire from AOL Inc. Facebook has agreed to purchase this portion for $550 million in cash.

In the initial AOL auction, Microsoft secured the ability to own or assign approximately 925 U.S. patents and patent applications plus a license to AOL’s remaining patent portfolio, which contains approximately 300 additional patents that were not for sale.As a result of today’s agreement, Facebook will obtain ownership of approximately 650 AOL patents and patent applications, plus a license to the AOL patents and applications that Microsoft will purchase and own.

Upon closing of this transaction with Facebook, Microsoft will retain ownership of approximately 275 AOL patents and applications; a license to the approximately 650 AOL patents and applications that will now be owned by Facebook; and a license to approximately 300 patents that AOL did not sell in its auction.

“Today’s agreement with Facebook enables us to recoup over half of our costs while achieving our goals from the AOL auction,” said Brad Smith, executive vice president and general counsel, Microsoft. “As we said earlier this month, we had submitted the winning AOL bid in order to obtain a durable license to the full AOL portfolio and ownership of certain patents that complement our existing portfolio.”

“Today’s agreement with Microsoft represents an important acquisition for Facebook,” said Ted Ullyot, general counsel, Facebook. “This is another significant step in our ongoing process of building an intellectual property portfolio to protect Facebook’s interests over the long term.”The parties are evaluating the accounting treatment for these transactions. These transactions are also subject to customary closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

Filed under: social