Yahoo's patent infringement suit against Facebook didn't take many by surprise, but the focus of the case just might. It's unlikely anyone will try to credit Yahoo with inventing social networking as we've come to understand it through sites like MySpace and Facebook, but Yahoo has been around since 1994 and has been involved in managing large groups of users and content since the mid 1990s. And as you might guess, the Sunnyvale, California company has assembled dozens of patents pertaining to its management of a global site with millions of members — a portfolio broadly applicable to the world of social networking.
Yahoo's complaint asserts ten patents against Facebook and breaks them down into five categories: advertising (four patents), user privacy (two patents), user customization (two patents), social networking (one patent) and messaging (one patent). That's a legitimate delineation, but there's no need to make it that complicated. The patents in this case basically break down into two categories: advertising and user interaction. So, let's take a detailed look at what Facebook is up against here.
Advertising revenue is at the core of Facebook's financial success. In 2011, Facebook confirmed $1 billion in net income, with 85 percent of that revenue coming from ads. Similarly, advertising revenue made up for 98 percent in 2009 and 95 percent in 2010. That's real money, and the importance of those numbers hasn't been lost on Yahoo. Four of the ten patents asserted against Facebook are aimed directly at grabbing a measurable piece of that income. Think of it like this: if you wanted a chunk of General Motors' revenue on a particular vehicle, you'd be much better off asserting your patents on the engine than on the design intricacies of the reclining seats. It's all about getting at the technology that defines the ultimate income source, and Yahoo seems to believe that several of its patents are broad enough to get at the way Facebook advertises on its platform. Here are the ad-focused patents in the case.
- US Patent No. 6,907,566 - this patent claims priority back to 1999 (granted 2005). The broadest claims cover calculating the performance of clicks on a web page link (e.g., ads) and ranking that performance compared to other available links on the page.
- US Patent No. 7,100,111 - this patent claims priority back to 1999 (granted 2006). Like the '566 patent, this one ranks the link clicks, but also displays the links most likely to get clicks in a "more visually prominent position" on the page.
- US Patent No. 7,373,599 - this patent claims priority back to 1999 (granted 2008). This patent specifically references advertisements — ads are arranged relative to one another on the page in descending order, taking into account the "price per click-through" for the advertisement.
- US Patent No. 7,668,861 - this patent claims priority to 2000 (granted 2008). The '861 patent is focused on categorizing a user based on the user's clicks on particular links (e.g., legitimacy, advertising preferences, etc.).
Yahoo has also targeted Facebook with several patents that seem to focus on the core functionality of any social network: control over who can access a user's information and content, and the ability of a user to communicate with other users. Here are the patents.
- US Patent No. 7,269,590 - this patent claims priority back to 2000 (granted 2007). The broadest claims cover filtering what user profile information is available to others based on the user's profile categories (e.g., memberships, relationships, etc.).
- US Patent No. 7,599,935 - this patent claims priority to 2004 (granted 2009). The claim coverage is all about determining a relationship between a first user and a second user, and using that relationship to define what content from the first user is accessible to the second user.
- US Patent No. 7,454,509 - this patent claims priority to 1999 (granted 2008). This patent covers an online community, where members set preferences for "data stream" content. Access to this content is based on the user's and the community's preferences.
- US Patent No. 5,983,227 - this patent claims priority to 1997 (granted 1999). The broadest claims cover a system for gathering user information, like a postal code, and determining the relative weather and sports teams information (within a predetermined geographical distance) associated with that user.
- US Patent No. 7,747,648 - this patent claims priority to 2005 (granted 2010). These patent claims are a convoluted mess and are seemingly impossible to distill down into words that can be understand by humans. There's a lot of opaque language about world servers, evaluative feedback, entity models, and identifiers. In the end, it may be more important to understand that this is the only patent Yahoo itself identified as covering the specifics of social networking. Regardless, Yahoo isn't likely to win over the hearts and minds of a judge or jury with this one.
- US Patent No. 7,406,501 - this patent claims priority back to 2003 (granted 2008). It covers a method of using pairing tokens to exchange messages between instant messengers and email users. If qualified, an email from one user is delivered as an instant message to another user.
There's a lot going on here, but it's simpler than it looks. Unlike Apple's patent battles with Samsung and Motorola, Yahoo isn't going into this with an eye towards shutting down Facebook with an injunction. Yahoo has made it clear that it wants to enter into a licensing agreement and these patents are the leverage it believes will get it there. Out of the many patents Yahoo owns, and the dozens it owns specifically on the technical inner workings of social networking, it chose to assert only those patents it believed were broad enough to attack Facebook's bread and butter: page advertising and the general management of users. Yahoo wants a slice of Facebook's future and given Yahoo's ever-declining importance in the industry, that shouldn't surprise anyone. Whether these patents are enough to pressure Facebook into a patent deal, however, remains to be seen. We should begin to get a feel for where this case is going in the next several months — after the parties get a chance to display the requisite amount of outrage and posturing, of course.