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March 28, 2012updated 22 Aug 2016 12:55pm

Facebook warns investors on Yahoo! threat

Facebook admits that the Yahoo lawsuit against the company for patent infringement could have significantly negative impact on the company.

By Tineka Smith

fb

yahoo

Facebook’s updated filing for an initial public offering (IPO) sends a warning to investors that Yahoo’s lawsuit against the social networking site could have a "material" impact.

The lawsuit filed by Yahoo against Facebook on March 12 claims that Facebook has infringed upon ten patents owned by Yahoo, some of which are "social networking," "messaging," and "advertising."

Facebook’s third amendment in its IPO filing addresses Yahoo’s patent lawsuit.

Yahoo is seeking unspecified damages, a damage multiplier for alleged willful infringement, and an injunction. We have not yet filed an answer or asserted any counterclaims with respect to this complaint.

Facebook admits in the filing that the lawsuit may have a detrimental impact on its business.

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"The litigation is still in its early stages and the final outcome, including our liability, if any, with respect to these claims, is uncertain," said Facebook in the filing."If an unfavorable outcome were to occur in this litigation, the impact could be material to our business, financial condition, or results of operations."

Even though it is still unclear if the claims by yahoo have merit, Jonathan Snade, senior associate in the corporate team at law firm Pinsent Masons, said companies should make sure to protect themselves in order avoid similar situations.

"While the strengths and merits of Yahoo!’s case are unclear at present, this does serve as a warning for companies to ensure that their patents and other intellectual property rights are properly protected and that they do not in turn breach the intellectual property rights of others," said Snade. "This applies to companies at every stage of growth – from start-ups to those seeking IPOs and beyond."

Facebook said in the filing they "intend to vigorously defend" the lawsuit. The company acquired 750 patents from IBM earlier this month to help in its fight against the suit.

 

Please follow this author on Twitter @Tineka_S or comment below.

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