Yahoo, Facebook Settle Patent Dispute

Yahoo! Inc. (YHOO) and Facebook (FB) Inc. settled a patent litigation case that began in March, while starting a new advertising partnership and strengthening distribution arrangements.

The settlement includes a cross-license agreement, according to a statement today. The companies said they will work together to bring advertisers ways to promote their products across Yahoo and Facebook’s websites. Facebook users will also get access to Yahoo’s media event coverage.

Yahoo filed the original lawsuit under the leadership of Scott Thompson, who resigned as chief executive officer in May amid pressure from investors, after failing to correct misstatements in his academic record. In the March lawsuit, Yahoo alleged that Facebook infringes patents covering such functions as Internet privacy, advertising and information sharing. Facebook, the largest social-networking service, countersued in April, accusing Yahoo of infringement.

Ross Levinsohn stepped in as interim chief executive after Thompson’s departure and is being considered as a permanent CEO, among other candidates, people familiar with the matter have said. Levinsohn and Sandberg helped work out the terms, according to other people familiar with the matter.

“We were able to resolve this in a positive manner and look forward to partnering closely with Ross and the leadership at Yahoo,” Sheryl Sandberg, Facebook’s chief operating officer, said in the statement. “Yahoo’s new leaders are driven by a renewed focus on innovation and providing great products to users.”

Suit, Countersuit

Yahoo, in the lawsuit filed March 12, sought an order barring Facebook from infringing 10 patents. It also sought triple damages. In the countersuit, Facebook accused Yahoo of infringing 10 patents through its home page and the Flickr-photo sharing service.

The end to the patent dispute may free Facebook from potential challenges the social-network website warned investors about in March.

“If an unfavorable outcome were to occur in this litigation, the impact could be material to our business, financial condition or results of operations,” Facebook, which sold shares in an initial public offering in May, said in a March 27 filing.

Facebook, based in Menlo Park, California, rose less than 1 percent to $31.73 at the close, while Yahoo fell less than 1 percent to $15.78.

Neither company has filed a request to have the case dismissed, according to court records.

The case is Yahoo! Inc. v. Facebook, 12-cv-01212, U.S. District Court, Northern District of California (San Francisco).

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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