Yahoo’s Lawsuit Against Facebook Makes An Awkward Position for Microsoft

When you mention Yahoo and Facebook now, the topic most likely will be the massive patents infringement lawsuit Yahoo has filed against Facebook this month. However, a lot of people may be forgetting that another company is in actuality very close to the issue and that is Microsoft.

A lot of attention has been recently lavished on the issue of Yahoo suing Facebook. What with Facebook’s initial public offering in the coming months expected to become the hottest-ever IPO in the history of technology companies, who wouldn’t turn their gaze to declining Yahoo which decided to file a big case against the world’s biggest social networking company.

To summarize, here’s Yahoo’s statement concerning the lawsuit:

“Yahoo! has invested substantial resources in research and development through the years, which has resulted in numerous patented inventions of technology that other companies have licensed. These technologies are the foundation of our business that engages over 700 million monthly unique visitors and represent the spirit of innovation upon which Yahoo! is built. Unfortunately, the matter with Facebook remains unresolved and we are compelled to seek redress in federal court. We are confident that we will prevail.”

Facebook has also been sending out the following statement in response to the lawsuit filed by Yahoo:

“We’re disappointed that Yahoo, a longtime business partner of Facebook and a company that has substantially benefitted from its association with Facebook, has decided to resort to litigation. Once again, we learned of Yahoo’s decision simultaneously with the media. We will defend ourselves vigorously against these puzzling actions.”

It looks like Facebook will not go down without a fight and is ready to fight Yahoo toe-to-toe on this. And yes, Yahoo and Facebook have long been partners. In 2009, Yahoo and Facebook signed an agreement wherein Yahoo integrated Facebook Connect to its products and Facebook got the better end of the deal because it was allowed access to Yahoo’s address book which was then about 600-million-contacts-strong.

Anyway, back to our point.

With the lawsuit Yahoo filed against Facebook, Microsoft has just found itself in a very awkward position. Why? Because it has big interests in both Yahoo and Facebook.

Lest you have forgotten, Microsoft’s Bing actually powers all search activity on Yahoo so Yahoo Search is essentially a sort of a rebranded Bing Search. Microsoft’s deal with Yahoo arguably also produces a lot of money for both companies.

On the other hand, Microsoft has a stake in Facebook. Actually, in 2010, an interesting tidbit came out of the Le Web ’10 conference in Paris, France. During the a question and answer portion of the event’s “How to Get Acquired” panel, a senior Microsoft executive confirmed that Microsoft repeatedly tried and failed to acquire Facebook. According to Microsoft Senior Director for Corporate Strategy and Acquisitions Fritz Lanman, “Yeah, we tried to acquire Facebook.”

Lanman said that Microsoft Chief Executive Officer Steve Ballmer had numerous talks with Facebook cofounder and CEO Mark Zuckerberg wherein Ballmer repeatedly pitched the idea that Microsoft buy Facebook outright for $15 billion.

Needless to say, Zuckerberg would not budge and so Microsoft ended up just investing $240 million in Facebook for about 1.6 percent of the company.

From all of this, we see that Microsoft will have a hard time making a decision about how to handle this issue. Would it favor Yahoo as it fights Google in the search engine wars? Would it favor Facebook because “social is the future”? Will it do nothing and let the dominoes fall first before reacting?

What do you think? Tell us more in the comments below.

Source: The Washington Post

Images 1, 2 & 3 Yahoo! – Service de presse, west.m & garethr on Flickr (Creative Commons)

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