Facebook’s reported purchase of 750 patents from IBM (NYSE:IBM) illustrates the importance intellectual property is taking on for the social network, whose exposure to patent litigation is expected to grow right along with the company.
As Bloomberg notes in a recent article about Facebook’s patent acquisition, the risk-disclosure statement included in Facebook’s IPO filing, on Feb. 1, made it plain that the company anticipates plenty of patent challenges: “We expect the number of patent and other intellectual property claims against us to grow. We may introduce new products, including in areas where we currently do not compete, which could increase our exposure to patent and other intellectual property claims.”
Certainly Facebook’s purchase of 750 patents could help ease investor anxiety about the company’s ability to defend itself as claims pile up. Among the most high-profile claims, of course, is the lawsuit filed this month by Yahoo (NASDAQ:YHOO) that alleges the social network is infringing on 10 of Yahoo’s patents. It’s not clear whether Facebook’s newly acquired cache of patents will help it defuse Yahoo’s claims, but there is a potential twist to Yahoo v. Facebook that could make settlement talks in the case interesting.
According to media site Law360, which focuses on litigation, some of the patents Facebook acquired from IBM are licensed to Yahoo, which could give Facebook leverage in its defense against Yahoo’s patent claims. The Verge speculates that Facebook will use the IBM patents to force Yahoo, which also has an operating partnership with Facebook a friendly partnership, to settle its lawsuit.
Facebook, which also has purchased patents from Hewlett-Packard (NYSE:HPQ) and early social-networking site Friendster, came to its IBM deal with 56 issued patents and 503 filed U.S. patent applications, according to Bloomberg. It had another 33 corresponding patents and 149 filed applications in foreign countries as of the end of last year.
IBM, meanwhile, continues to dominate the patent arena. The company, based in Armonk, NY, is the world’s largest holder of patents, winning 6,180 new patents from the U.S. Patent and Trademark Office last year. That has made IBM a magnet for Internet companies trying to shore up their intellectual property portfolio and defend against lawsuits. Google (NASDAQ:GOOG), for example, bought more than 2000 patents last year from IBM and another 200 this year, according to eWeek.