When Yahoo! filed a 10-count patent infringement lawsuit against Facebook earlier this week it caused a stir in NY’s tech scene. According to Capital New York, the outcry from people like Fred Wilson of Union Square Ventures isn’t over patent violation. Instead, they claim Yahoo broke the unspoken code that binds the NY tech community together.
The suit, filed in the U.S. District Court of Northern California, alleges that Facebook’s social network model where users create profiles for people and businesses is based on Yahoo!’s patented social networking technology. Facebook’s reply came in a statement saying, “We will defend ourselves vigorously against these puzzling actions.”
Tech bloggers quickly denounced Yahoo!, but Fred Wilson’s word carries a lot of currency. On his highly influential blog, AVC: Musings of a VC in NYC, he wrote, “Yahoo! thinks they can bully Internet newcomers with their bogus patents. And that’s a line that they should not have crossed.”
Most of NY’s tech scene is made of startups with web-based social networks. According to Capital New York, these companies are not defined by hardware or software but by an ethos centered on connecting people. The social web binding NY’s tech scene together is what Yahoo! is trying to rip apart with its lawsuit.
Wilson declared Yahoo a “bully” and wrote that the company “has broken ranks and crossed the spoken line which is that web companies don’t sue each other over their bogus patent portfolios. I don’t think there’s a unique idea out there in the web space and hasn’t been for well over a decade.”
Wilson isn’t alone in his legal analysis. Patent expert Michael Meurer told Capital New York that many high-tech firms have an implicit understanding that they won’t sue one another. Instead of settling disputes with lawsuits, tech companies generally work thing out with conversations and self-regulation, according to Charlie O’Donnell of Brooklyn Bridge Ventures.
Moreover, the common consensus is that innovative work isn’t really patentable. Bloggers say that when Yahoo!, with its diminished future, looks at Facebook’s deep pockets, it thinks it can cash in on its patent portfolio. But it’s setting a precedent that could be devastating.
“When it makes more sense to spend money on a lawyer than on developers,” O’Donnell told Capital New York, “that’s when you know you have a problem.”