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Yahoo reportedly has a license to patents Facebook just bought from IBM

Yahoo reportedly has a license to patents Facebook just bought from IBM


Reports are that the lot of 750 patents Facebook bought from IBM are licensed to Yahoo.

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Law360 is reporting a source has told them that the lot of 750 patents Facebook is buying from IBM "were licensed to Yahoo." That's the extent of the insider information, but not the questions it raises. Why would Facebook do this? Is this a smart move? There are probably more questions to consider, but let's start there and see where we end up.

Why would Facebook make this move? This is probably the easiest question to answer: in theory, it puts Facebook in a position of power over Yahoo. Yahoo sued Facebook for infringing ten patents just last week, and we've learned that Facebook has a modest patent portfolio by anybody's standards, at less than 60 issued US patents. Facebook would obviously love to get some added value out of these 750 patents, with the assumption that Yahoo still needs a license to IBM's patented technology in order to conduct its business. Right now we know very little about the scope of the patents Facebook bought from IBM — except that they purport to cover "software and networking" technologies. Given that, it's plausible that they could be important to Yahoo's global site and services.

With that assumption in mind, Facebook's strategy might go something like this: as the new owner of the patents, we'll use them as leverage to get Yahoo to drop its patent infringement suit. On its face that sounds like a clever plan, but clever plans don't always work out when they make contact with reality. And that brings us to the next question.

Was this an ingenious move by Facebook? Well, it depends. Of course that's not a great answer, but there really are a lot of unknowns in play right now. The biggest unknown is the language of the original license agreement between Yahoo and IBM. It's possible that one variable alone could ultimately determine whether Facebook is on to something, or if it's simply being too clever by half.

In most cases, a patent owner is freely allowed to transfer ownership of its patents over to another entity (such as Facebook). However, such a transfer won't typically affect the rights of the licensee (Yahoo). In fact, many license agreements don't give the original patent owner, or the new patent owner, many options at all for altering or ending the license, absent extreme circumstances like the expiration of the patents, insolvency, breach, or a failure to pay royalties. The problem here is that we simply don't know if Yahoo and IBM have a typical license agreement. Who knows, maybe Facebook has thought this all through and has a well-defined plan of attack. Or maybe they're gambling on this move. Time will tell, but we'll certainly keep close tabs on developments in this case. Things might just get interesting.