Yahoo lawsuit complicates looming Facebook IPO

With the patent-infringement lawsuit filed by Yahoo against Facebook evidently hinting at the aggressive strategy being followed by the new Yahoo CEO Scott Thompson – who took over the reins of the company in January -, the legal proceedings have clearly put Facebook in a somewhat awkward position, complicating the looming launch of the social network’s initial public offering (IPO) expected in May.

In its lawsuit filed in federal court in California on Monday, Yahoo accused Facebook of violating as many as ten of its patents, particularly in technologies pertaining to advertising, site customization, privacy, social networking and integrated communications in social networking.

The lawsuit filed by Yahoo has seemingly discomfited Facebook – apparently something that Yahoo actually wanted – because, with potential investors mulling investment options in the social network, the timing of the lawsuit is highly inapt.

With Yahoo already having a history of initiating legal proceedings against Google in 2004, just before the Internet search giant’s IPO, and consequently grabbing a chunk of the Google stock in settlement, analysts are of the opinion that Yahoo is seemingly looking at a similar deal with Facebook, which would want to settle the legal dispute at the earliest.

Noting that the lawsuit filed by Yahoo will “put a cloud over Facebook’s IPO”, thus pressurizing the social network to work out a settlement, Enderle Group’s analyst Rob Enderle said: “Basically, Yahoo is using the IPO as a lever to force Facebook to settle when they otherwise wouldn’t … That is why Yahoo is doing this now.”