Yahoo’s Suit Affects Facebook Outcome Negatively

Facebook Inc. (FB), the social- networking service that’s planning an initial public offering “IPO”, said a patent dispute with Yahoo! Inc. (YHOO) (YHOO) could have a material impact on its business.

Yahoo (YHOO) sued Facebook on March 12, alleging that the site infringes Yahoo patents related to advertising, social networking, privacy, customization and messaging, Facebook said today in a filing. The Menlo Park, California-based company said it hasn’t yet issued a response to the lawsuit.

“This litigation is still in its early stages,” Facebook said in the filing. “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, the world’s most popular social-networking service, is grappling with more lawsuits over intellectual property. The company, which had about 60 U.S. patents at the end of last year, is aiming to defend itself by bolstering its portfolio.

Facebook acquired 750 patents from International Business Machines Corp. (IBM), a person familiar with the matter said earlier this month, as Bloomberg stated.

Yahoo (YHOO), the largest U.S. Web portal, has demanded that Facebook license its technology, saying that other companies have done so. In the complaint, Yahoo asked for an order barring Facebook from infringing 10 patents and for triple damages.

At the time, Facebook said it was “disappointed” in the lawsuit and would defend itself against “these puzzling actions.”