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Facebook Fires Back at Yahoo

The social networking giant is upping the patent-war stakes


A couple weeks ago, Yahoo (NASDAQ:YHOOfiled a patent lawsuit against Facebook, with an attempt to stall the social networking giant’s IPO. But Facebook has decided to not back down. Today it filed a countersuit.

Facebook alleges that Yahoo has violated 10 of its own patents that cover key areas like content optimization, photo sharing and display ads.

It’s a smart move. The outstanding litigation is likely to take a long time — perhaps more than a couple years. In the meantime, Facebook is likely to continue growing at a nice pace and continue taking away market share from the struggling Yahoo.

While the litigation is going to be a big question during Facebook’s roadshow, it probably won’t be a deal-killer. Patent litigation has become a normal part of the tech landscape, with companies like Apple (NASDAQ:AAPL) deeply involved. Besides, investors will also be reassured that Facebook is willing to fight hard. Plus, it has reportedly purchased 650 patents from IBM (NYSE:IBM) to bolster its intellectual property portfolio.

According to Faceook General Counsel Ted Ullyot, “From the outset, we said we would defend ourselves vigorously against Yahoo’s lawsuit, and today we filed our answer as well as counter-claims against Yahoo for infringing ten of Facebook’s patents. While we are asserting patent claims of our own, we do so in response to Yahoo’s short-sighted decision to attack one of its partners and prioritize litigation over innovation.”

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook”“All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.

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