Late last year, Yahoo filed for a trademark on the phrase “Yahoo Axis.” The filing raised more questions than answers at the time, but after six months Yahoo has finally spilled the proverbial beans — Axis is both a new search-oriented add-on for your web browser, and a new browser app for iOS.

Before I talk about what it’s like to actually use Axis, let’s first discuss why the hell they’re doing this in the first place. TechCrunch spoke to Yahoo’s Director of Product Management Ethan Batraski, and he told us his his job has been to figure out what search looks like over the next few years. Yahoo Axis was one of his answers.

“No one’s innovated on ‘How do I get rid of the search results page altogether’”, Batraski said. “That is what we want to do.”

That’s exactly what they did. Once you download, install, and log into Axis with your Yahoo credentials (you do have Yahoo credentials, don’t you?), a small back bar will begin to live in the bottom left corner of your preferred web browser. Right now Axis plugs into Chrome, Firefox, Safari, and Internet Explorer, though Batraski didn’t completely rule out the possibility of Yahoo eventually releasing their own browser should there be enough interest.

That little black pill has a search bar nestled in it, and mousing over it causes it to stretch across the bottom of your browser window. Actually clicking in the search box and plugging in a search query makes the bar expand to fill roughly the bottom third of your browser window, displaying easily-scannable thumbnails of Yahoo’s search results.

Yahoo’s idea here is to give their (or perhaps more accurately, Microsoft’s) search engine its own flexible space to live in outside of the traditional browser paradigm. With Axis installed, users who need to find things online don’t need to tear themselves away from the page they’re currently looking at by navigating to a different page or opening a new tab. There’s no question that it takes a little getting used to — as a longtime Chrome user, it’s become second nature to open a new tab a bang a search query into the address bar — but it’s been very thoughtfully executed.

When Axis works (which is most of the time) it works very well. Occasionally, the black search box will fail to close properly, leaving behind a partial remnant of the last search result thumbnail in its place.

Perhaps one of the most annoying things about Axis (at least on a Mac) is scrolling horizontally through the thumbnails of search results. Users can click and drag through them with a mouse or hit buttons mounted to the left or right of the results panel, but scrolling side to side with a trackpad can be tricky. It causes the results to move over three results at a time, which sometimes means you miss seeing some results.It’s a relatively minor point of contention (and one that’s probably easy to fix), but still, there you have it.

But Axis on the desktop is only one part of the equation — its other half lives on your iPhone (or your iPad). Yahoo has also whipped together a standalone browser app for iOS that seeks to bring that same revamped search experience to the mobile space.

This is where Yahoo actually manages to make me swoon a little bit. The iOS app is surprisingly good — it’s more than handsome enough, it runs very smoothly (thanks mostly to its WebKit underpinnings), and your bookmarks sync between devices quickly once you make sure you’re logged in. I’ll also admit right here that I’m a bit of a sucker for their font choices, but let’s not dwell on that.

If anything, the big thumbnails for search results play out even better on a small screen. There’s no angling to make sure your finger touches the link just right. That said, I’m not sure it’ll be replacing the stock Browser app for me — what’s great about Axis for the desktop is that it fits into whatever browser you’ve decided you like enough to use. On iOS though, there’s no way to set a default browser so it takes a conscientious effort to use Axis there.

For now, the Axis browser app remains an iOS exclusive. It’s not entirely impossible that we’ll see a version make its way onto Android someday, though I imagine Google may not take too kindly to a another search company trying to set foot in their territory.

Batraski referred to Axis as an “experiment,” but to my utter pleasure, it’s a pretty damned good one. Is it enough to make a dyed-in-the-wool Googler convert? Probably not, but with nearly 700 million users still using Yahoo, I reckon a solid chunk will find something to enjoy here.

Well, after days and days of nothing, suddenly things are moving at a fast clip. After news came out just hours ago that Thompson might be leaving the company tomorrow, moments ago Yahoo officially confirmed the news, as we reported earlier: Ross Levinsohn is now interim Chief Executive Officer, replacing Scott Thompson, and Fred Amoroso is chairman of the board.

Scott Thompson’s departure and the reasons for it are not mentioned at all in the statement, which simply says he has left the company. (Earlier a report in AllThingsD had said he would resign for personal reasons, although at least in this statement nothing at all is mentioned for why he has left.)

The announcement from Yahoo also underscores how activist shareholder Third Point is very much a key player in all of this.

Third Point, led by Daniel Loeb, is a 5.8 percent shareholder in Yahoo and had been behind some of the strongest statements against Scott Thompson and his continuing tenure even after it emerged that Thompson had not been entirely honest in stating his past experience, and for the board’s responsibility in putting him there in the first place and then not taking decisive enough steps to remove him and put the company back in working order.

All of that looks like water under the bridge… for now at least. Yahoo’s statement says that with the changes being announced today Third Point has agreed to settle its pending proxy contest related to the company’s 2012 annual meeting of shareholders.

“We are committed to working with new leadership to unlock Yahoo!’s significant potential and value,” said Loeb in the statement.

Amoroso replaces Roy Bostock, who was one of the key people who had appointed Scott Thompson as CEO earlier this year. Yahoo gives the reason for his departure as being done to “accelerate the leadership transition for the new Board.”

Other board appointments are as follows: Three Third Point nominees — Daniel S. Loeb, Harry J. Wilson, and Michael J. Wolf — will join the Yahoo! Board, effective May 16, 2012. In addition to Bostock, Patti Hart, VJ Joshi, Arthur Kern and Gary Wilson and Thompson are all stepping down from the board immediately.

The big question now is what next for Yahoo.

Thompson — in very quick order, something he had been determined to do — cut a lot of staff (numbering in the thousands); slashed several programs (including some 50 properties, mobile sites, and more) and looked like he was trying to turn around the big purple ship to sail in a different direction from the one it was going in before, initiating for example a new commerce division, and – quite amazingly — Yahoo also lodged a patent lawsuit against Facebook in the process, setting out a position for itself as a defensive company using more than just current business initiatives to make sure it remained competitive.

So will Levinsohn be continuing with any of that, or will he be starting yet another clean slate for the company? As I mentioned in the earlier post, Levinsohn’s experience is pretty radically different from Thompson’s and if his interim position is any longer than five minutes he may have a chance to play some of that out. Some have already speculated that we may see a settlement to the patent suits. That would at least help Yahoo’s image problem among those in the tech world who were disheartened to hear of the suit and what it signified both for Yahoo and the state of patent litigation.

Release below.

SUNNYVALE, Calif. — Yahoo! Inc. (NASDAQ: YHOO) today announced that the Board of Directors has named Fred Amoroso as Chairman of the Board of Directors and Ross Levinsohn as interim Chief Executive Officer, effective immediately. The Company also announced that its Board has reached an agreement with Third Point LLC (“Third Point”) to settle its pending proxy contest related to the Company’s 2012 annual meeting of shareholders.

Mr. Amoroso replaces Roy Bostock, who has stepped down from his role as Non-Executive Chairman in order to accelerate the leadership transition for the new Board. Mr. Levinsohn replaces Scott Thompson, former Chief Executive Officer, who has left the Company.

Under the Board’s settlement agreement with Third Point, three Third Point nominees — Daniel S. Loeb, Harry J. Wilson, and Michael J. Wolf — will join the Yahoo! Board, effective May 16, 2012. Mr. Bostock, along with Patti Hart, VJ Joshi, Arthur Kern and Gary Wilson, all of whom previously disclosed their intentions not to stand for re-election, as well as Mr. Thompson, have decided to step down from the Board immediately.

As a part of the settlement agreement, Third Point, which owns an aggregate of 70,545,400 shares, or 5.8% of Yahoo! common stock, has agreed to withdraw its previous Board nominations for consideration at the annual meeting and vote its shares in support of Yahoo!’s nominees. Yahoo!’s slate of director nominees for election or re-election at the 2012 annual meeting of stockholders will now include Fred Amoroso, John Hayes, Peter Liguori, Thomas McInerney, Maynard Webb, Sue James, David Kenny, Brad Smith, Daniel S. Loeb, Harry J. Wilson and Michael J. Wolf.

As interim CEO, Mr. Levinsohn will manage the Company’s day-to-day operations with assistance from Yahoo!’s existing senior leadership team.

“The Board is pleased to announce these changes and the settlement with Third Point, and is confident that they will serve the best interests of our shareholders and further accelerate the substantial advances the Company has made operationally and organizationally since last August. The Board believes in the strength of the Company’s business and assets, and in the opportunities before us, and I am honored to work closely with my fellow directors and Ross to continue to drive Yahoo! forward,” said Fred Amoroso, Chairman of the Yahoo! Board of Directors.

Mr. Amoroso continued, “On behalf of the entire Board, I would also like to thank Patti, VJ, Arthur, Gary and, in particular, Roy, for their dedicated long-term service and contributions to the Board and Yahoo!.”

Third Point Chief Executive Officer Daniel S. Loeb stated: “Harry, Michael and I are delighted to join the Yahoo! Board and work collaboratively with our fellow directors to foster a culture of leadership dedicated to innovation, excellence in corporate governance, and responsiveness to users, advertisers and partners. We are confident this Board will benefit from shareholder representation, and we are committed to working with new leadership to unlock Yahoo!’s significant potential and value.”

Third Point Director Nominee Jeff Zucker stated: “I have been supportive of Third Point’s efforts since Daniel asked me to join the slate. When I became aware of Yahoo!’s offer of three board seats to Third Point, I approached Daniel and let him know that I would be happy to step aside to quickly facilitate a settlement. I believe that it is in Yahoo!’s best interests to avoid a prolonged proxy fight and have new board members immediately to help move the company forward. While there is clearly much work to be done, this is the right combination of talented executives to do just that.”

About Yahoo!

Yahoo! is the premier digital media company, creating deeply personal digital experiences that keep more than half a billion people connected to what matters most to them, across devices and around the globe. And Yahoo!’s unique combination of Science + Art + Scale connects advertisers to the consumers who build their businesses. Yahoo! is headquartered in Sunnyvale, California. For more information, visit the pressroom (pressroom.yahoo.net ) or the company’s blog, Yodel Anecdotal (yodel.yahoo.com ).

About Third Point LLC

About Third Point LLC : Third Point is an investment firm headquartered in New York, managing $9.0 billion in assets, including a London Stock Exchange listed closed-end fund. Founded in 1995, Third Point follows an event-driven approach to investing globally.

Forward-Looking Statements

This press release contains forward-looking statements concerning such matters as Yahoo!’s new directors and strategic activities and plans. Risks and uncertainties may cause actual results to differ materially from the results predicted. The potential risks and uncertainties include, among others, the impact of management and organizational changes; the implementation and results of any strategic plans as well as Yahoo!’s ongoing strategic and cost initiatives; Yahoo!’s ability to compete with new or existing competitors; reduction in spending by, or loss of, advertising customers; risks related to Yahoo!’s regulatory environment; interruptions or delays in the provision of Yahoo!’s services; security breaches; acceptance by users of new products and services; risks related to joint ventures and the integration of acquisitions; risks related to Yahoo!’s international operations; failure to manage growth and diversification; adverse results in litigation, including intellectual property infringement claims and recent derivative and class actions; Yahoo!’s ability to protect its intellectual property and the value of its brands; dependence on key personnel; dependence on third parties for technology, services, content, and distribution; general economic conditions and changes in economic conditions; transition and implementation risks associated with the Search Agreement with Microsoft Corporation; and risks that the benefits of the Framework Agreement Yahoo! entered into with Alibaba Group, Softbank Corporation and certain other parties regarding Alipay may not be realized. All information set forth in this press release is as of May 13, 2012. Yahoo! does not intend, and undertakes no duty, to update this information to reflect subsequent events or circumstances. More information about potential factors that could affect Yahoo!’s business and financial results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Yahoo!’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as amended, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, which are on file with the Securities and Exchange Commission (“SEC”) and available at the SEC’s website at www.sec.gov.

Important Additional Information

Yahoo! has filed a preliminary proxy statement with the Securities and Exchange Commission (the “SEC”) and will be filing a definitive proxy statement with the SEC in connection with the solicitation of proxies for its 2012 annual meeting of shareholders. Shareholders are strongly advised to read Yahoo!’s 2012 definitive proxy statement (including any amendments or supplements thereto) when it becomes available because it will contain important information. Shareholders will be able to obtain copies of Yahoo!’s 2012 proxy statement, any amendments or supplements to the proxy statement, and other documents filed by Yahoo! with the SEC in connection with its 2012 annual meeting of shareholders for no charge at the SEC’s website at www.sec.gov. Copies of the proxy materials may also be requested from Yahoo!’s proxy solicitor, Innisfree M&A Incorporated, by telephone at (877) 750-9499 (toll-free) or by email atinfo@innisfreema.com. Yahoo!, its directors, executive officers and certain employees are deemed participants in the solicitation of proxies from shareholders in connection with Yahoo!’s 2012 annual meeting of shareholders. Information regarding Yahoo!’s directors, executive officers and other persons who, under rules of the SEC, are considered participants in the solicitation of proxies for the 2012 annual meeting of shareholders, including their respective interests by security holdings or otherwise, is set forth in the preliminary proxy statement Yahoo! filed with the SEC on April 27, 2012 and will be set forth in the definitive proxy statement for Yahoo!’s 2012 annual meeting of shareholders when it is filed with the SEC.

We’re still confirming the news with Yahoo but AllThingsD’s Kara Swisher is reporting that as of tomorrow, Scott Thompson will be leaving his role as CEO of Yahoo, and getting replaced, on an interim basis, by Ross Levinsohn, currently the global media head. Update: Thompson’s now officially out and Levinsohn’s in. Read the updated report here.

Thompson’s position has been mired in controversy since news broke the other week that he had lied about his qualifications — and that situation seemed to be going from bad to worse as the company failed to act on the news in any significant way — and Thompson remained in control. Some may even find the method in which he is finally going unsatisfactory: the company will apparently cite “personal reasons” for his departure, according to AllThingsD.

Levinsohn, currently still the global media head overseeing advertising across all of Yahoo, had previously been the head of Yahoo’s Americas unit, a position he had held from November 2010.

On paper, he is much closer to Yahoo’s core business operations than Thompson, who came to Yahoo from his past role as head of PayPal: in addition to the advertising experience, Levinsohn’s background includes three years as MD of Fuse Capital, a media/tech investment firm; and before that he put in time at News Corp as the head of Fox Interactive Media — the company’s big push into digital that included MySpace, their mobile business and other digital efforts, some $1 billion in acquisitions in all.

Yahoo’s content business has downsized significantly as the company has streamlined operations — for example, Thompson announced the closure of some 50 properties in April — but there are still some significant opportunities there that, if Levinsohn really does come into the role and stays for more than the blink of an eye, you can see him working to tease out.

Back in September 2011, Levinsohn noted that News was Yahoo’s biggest property and that it was seeing traffic of 40 billion pageviews across all of its properties, with six billion of those on news. The key, he said at the time, was to monetize that traffic better by getting people to spend more time on Yahoo’s sites. He didn’t rule out closer relationships with other online content companies like Hulu as one route to getting those minutes spent on Yahoo’s sites up.

Swisher’s report also mentions that Daniel Loeb, the activist shareholder from Third Point who has been clamoring for board changes at the company, is also set for some potential vindication: she writes that he is set to get three board seats, including media executive Michael Wolf and “turnaround specialist” Harry Wilson — who are set to join as five current Yahoo directors step down with immediate effect. New director Fred Amoroso, who has been investigating issues raised by Loeb, will be named chairman of the board, she writes. Note: none of this has yet been confirmed with Yahoo directly yet.

We have reached out to Yahoo for confirmation and more details and will update this story as we learn more.

What’s the penalty for lying on a resume? It’s an important question for new Yahoo CEO Scott Thompson, after his PR department offered up the laughable excuse that he made “an inadvertent error” on Yahoo’s website and in an SEC filing claiming he had a Computer Science degree. TechCrunch editor Eric Eldon just wrote this should cost him his new job. At Yahoo, the penalty could include “immediate discharge”.

I got a job at Yahoo in 1999. Before I started, I was required to fill out an Employment Application. The form included educational and employment history information and notes “A resume may be attached.” At the bottom of the form, there is a boxed section, with the bold headline “Authorization: Please read carefully, initial each paragraph and sign below.”

Here’s the first paragraph in that section:

“I certify that the facts on this Employment Application (and any supplements attached) are true and complete. I further understand that any omissions or misrepresentations made by me on this application will be sufficient grounds for denying my application, withdrawing any offer of employment or immediate discharge.”

So, if I had made ANY misrepresentations (in Yahoo PR speak: “inadvertent errors”) as a Yahoo employee, I would have been at risk of losing my job immediately. We’ll find out if the same rules apply to the CEO.

Some caveats here of course. This application is more than 10 years old and Yahoo might have changed this part. Unlikely. Also, Thompson’s employment application (if he even wrote one) and his contract are not part of the public record, so we don’t know exactly what’s in there.

We do know what’s in documents Yahoo filed with the SEC where the false degree was also mentioned. As activist shareholder Daniel Loeb noted in his letter to the Board, Yahoo’s Code of Ethics may have been violated. It states “Disclosure in reports and documents filed with or submitted to the U.S. Securities and Exchange Commission, and in other public communications made by Yahoo! must be full, fair, accurate, timely and understandable.”

Update: Michael Arrington, who is now CEO of Yahoo according to his LinkedIn profile, just reported Yahoo even has a 24-hour IntegrityLine to report Code of Ethics violations. Mike says he called the number “and damn if they don’t pick that phone up on the first ring.” I tried calling the number and all I get is some peaceful on hold music and a message “Thank you for holding.” Seems that line might be pretty busy right now.

Perhaps, Thompson should have read this article, found ironically on Yahoo Voices titled “3 Reasons You Should Never Lie on Your Resume.” It ends with the following suggestion on why its not a good idea. “In the end, you’ll be happier for not having to look over your shoulder for the rest of your career, just wondering if, right now, someone is calling that bogus school you mentioned last year when you finally got your dream job.”

[Image: alexskopje/Shutterstock]

You may not know this but Yahoo still operates a product called Yahoo Small Business, which provides SMBs and sites with web hosting, domain name registration, web site design templates, e-commerce solutions and more. In fact, Yahoo says that it has helped millions of businesses get online and grow their presence on the web. Today, the company is debuting a new marketing dashboard to give users additional insight into online reputation, web metrics and more.

As the company explains, the new tool allows small businesses to analyze website metrics and maintain accurate and comprehensive business listings across the Web. For example, the dashboard enables social media monitoring and provides recommendations on new listing opportunities, including on Yelp, Yahoo and others.

The dashboard also includes online reputation management, pulling information and reviews from up to 8,000 sources such as Facebook and Twitter. Users can access website performance metrics from various sources including Google Analytics. And the dashboard provides email marketing, SEO, and SEM campaign tracking.

The marketing dashboard also has a number of paid features, including a suped up version of its reputation management functionality, email campaign tracking, and more.

It should be interesting to see if Yahoo Small Business will survive new CEO Scott Thompson’s plans to cut 50 Yahoo properties.

Editor’s Note: Leonid (“Lenny”) Kravets is a patent attorney at Panitch, Schwarze, Belisario and Nadel, LLP in Philadelphia, PA. Lenny focuses his practice on patent prosecution and intellectual property transactions in computer-related technology areas. He specializes in developing IP strategy for young technology companies and blogs on this topic at StartupsIP. Follow Lenny on Twitter: @lkravets and @startupsIP.

In the past few months, Facebook’s patent portfolio has grown exponentially as a result of acquisitions of patent portfolios from IBM and Microsoft. After acquiring 650 AOL patents and patent applications from Microsoft, the company now has approximately 1,400 patent assets. Amazingly, only 46 of these assets (24 issued patents and 22 published applications) were originally filed by Facebook.

In recent years, Facebook has consistently looked to the outside to augment its IP holdings with strategic acquisitions of patent assets. The company paid 40 million for the Friendster social networking patent portfolio, acquired a group of patents from Walker Digital, and another from Hewlett-Packard. These deals expanded the portfolio to approximately 160 patent assets prior to Yahoo’s lawsuit being filed. After Facebook’s IPO decision, and the subsequent patent suit by Yahoo, Facebook has kicked its patent acquisition program into overdrive.

Many point to the Yahoo lawsuit as the reason for the Microsoft and IBM acquisitions. The the AOL portfolio could useful to Facebook in defending itself against Yahoo. However, now Yahoo is trying to have other patents Facebook bought after being sued by the web portal invalidated because Facebook purchased them specifically to use in a retaliatory counter-suit. In any case, it would have been significantly cheaper for Facebook to settle with Yahoo instead of taking this aggressive approach.

So who is Facebook so worried about that it would spend so much on buying intellectual property? The types of patents being acquired tell part of the story. Facebook has emphasized acquiring older assets, which it could not have developed on its own. Facebook’s oldest patent was filed in 2004, the same year the company was created. A typical patent application currently takes approximately 3-4 years to be issued. Developing a patent portfolio in the social networking space is challenging because the popularity of social networking companies has resulted in the space being littered with both patent and non-patent prior art. As a result, companies, such as Facebook, that initially largely ignored growing their IP portfolios, cannot rely on filing its own applications to develop a substantive IP portfolio.

The IBM and AOL patent acquisitions give Facebook access to IP that is significantly older than Facebook’s own IP. Older patents are subject to fewer prior art, making them more difficult to defend against. In addition, older patents provide leverage for the asserting party by allowing collection of up to six years of damages from the infringer. Such patents are therefore especially helpful in dealing with established parties having significant resources and sophisticated legal teams.

The technology areas of the IBM and AOL patents are also telling. The patents Facebook acquired from IBM are rumored to be in the networking and software space. AOL’s patents are largely directed to email, instant messaging, web browsing, search, ads, mobile, & ecommerce. Together, these are technology areas that Facebook likely never expected to find itself competing in when the company was first founded because it may not have realized that their product would evolve into the messaging/advertising/ecommerce platform that it is today. These are also technology areas that are core to Google, one of Facebook’s biggest threats.

In the past year, Google introduced Google+, a direct competitor and challenger to Facebook. While Google+ has only had moderate success to date, Facebook likely felt exposed against Google’s significantly larger and ever-expanding patent portfolio. These patent acquisitions provide Facebook with some protection as the competition between the two companies heats up. In addition, the rumors of an Android-based Facebook phone have been revived, which could bring Facebook directly into the litigious mobile space, where Google is one of the main players.

Interestingly, this is not the first time that Facebook and Microsoft have worked together with Google in mind. In October 2007, the two companies entered into an Internet advertising partnership. That deal was seen as a way for Microsoft to counter Google’s Internet advertising position. It makes sense that the two companies would again collaborate to respond to a potential threat from Google.

Thus, while the acquisitions may be helpful to Facebook in dealing with Yahoo, it is likely that these acquisitions have less to do with Yahoo than with Facebook’s anticipation of future litigation. Specifically, Facebook appears to be preparing for increased competition with Google. It bears watching whether the companies will look to their patent acquisitions as part of this strategy. Of course, such protection has the added benefit of helping to increase Facebook’s IPO value, making this decision a no-brainer for the company.

Today Yahoo hit Facebook with five big counter-counterclaims designed to invalidate the patents cited in the social network’s infringement countersuit. If the court concurs, Facebook could be left wide-open in settlement negotiations, and might have to pay Yahoo a hefty sum of cash and/or stock.

Specifically, the old web portal claims that after it sued for patent infringement, Facebook bought patents ”for purposes of retaliation”.   Therefore they don’t meet the U.S. Patent Office’s “Duty of Disclosure, Candor, and Good Faith” and should be thrown out of Facebook’s countersuit against Yahoo.

Yahoo also claims Facebook broke their agreement to inform each other of IP issues, couldn’t legally know if Yahoo was violating its patents, and that several of Facebook’s new patents were illegally filed. Finally, Yahoo filed two more advertising patent infringement claims against Facebook that look to be quite incriminating. Here’s breakdown of the five claims and how they’ll influence the outcome of the case.

CNET reports a statement from Yahoo that details its position, and also using the word “innovation” to try to seem less troll-like:

“Today’s filing underscores the breadth of Facebook’s violation of Yahoo!’s intellectual property. As we have stated previously, Yahoo!’s 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. We intend to vigorously protect these technologies for our customers and shareholders.”

Facebook responded:

“We remain perplexed by Yahoo’s erratic actions. We disagree with these latest claims and we will continue to defend ourselves vigorously.”

Oddly, when Facebook bought AOL patents from Microsoft last week, Yahoo said “Companies who purchase patents are often working from a position of weakness and take these actions to strengthen their portfolio.” However, the two new patent infringement lawsuits it filed today and three of the original ten are based on patents Yahoo itself had purchased in the acquisition of Overture.

Here are Yahoo’s five counter-counterclaims and what they mean for the case:

1. Facebook’s Patent Countersuit Not In Good Faith

Yahoo says of the ten patents Facebook countersued with:

“Eight of these patents were purchased by Facebook in the past five months, and several of these patents were purchased (independent of any separate technology acquisition or merger) after Yahoo! filed its complaint in this action. On information and belief, many, if not all, of these patents were acquired by Facebook for purposes of retaliation against Yahoo! in this case. No employee or officer of Facebook or any affiliated company conceived of, reduced to practice, or developed the alleged inventions claimed in the eight patents acquired from non-practicing entities. In fact, the applications for many of these patents predate Facebook itself.

Since these were bought from non-practicing entities (aka trolls) rather than being originally filed to cover Facebook’s own technologies, they could be ruled to lack “good faith” and be thrown out, leaving Facebook nothing to offset Yahoo’s infringement claims with.

2. Facebook Infringes On Two More Yahoo Advertising Patents

Yahoo Claims that in addition to its ten original infringement claims, Facebook also infringes on:

Yahoo’s U.S. Patent No. 7,698,315 for ”System and method allowing advertisers to manage search listings in a pay for placement search system using grouping” – Essentially the ability for advertisers to see their ads grouped by campaign, assess performance, and make changes to multiple grouped ads simultaneously. Specifically, the technology “enables the advertiser to simultaneously modify a plurality of advertisements” as well as “calculating performance metrics for the advertising group; and producing a display showing a statistics view.”

Facebook’s self-serve ad tool and Ads API both have this capabilit, and therefore may very well infringe on this Yahoo patent.

and Yahoo’s U.S. Patent No. 7,933,903 for “System and method to determine the validity of and interaction on a network” – Essentially this means assessing whether an ad click is fraudelent by looking at the clicks per IP address, clicks in a given time period, and other factors. If these signals indicate a high risk of click fraud, the click is discounted.

Facebook very likely uses this or a similar method to attempt to protect advertisers from paying for fake clicks.

3. Facebook Failed To Inform Yahoo Of IP Issues Before Countersuing

Yahoo claims:

Contrary to an agreement between in-house counsel for Facebook and in-house counsel for Yahoo! to raise intellectual property issues with each other in the first instance, Facebook provided no notice to Yahoo! of any alleged infringement, and Facebook never attempted to resolve any alleged infringement of any of its patents by Yahoo! prior to asserting them in litigation. Indeed, the PTO did not even issue U.S. Patent No. 8,150,913 until April 3, 2012—the day Facebook asserted it.

This break in the agreement, and that fact that Facebook countersued with patents issued and that it had bought that day could lend weight to Yahoo’s previous claim that Facebook’s countersuit lacks “good faith”. 

4. Facebook Couldn’t Know Yahoo’s Technology Violates Its Patents

Yahoo claims:

Facebook asserted its newly-acquired patents against aspects of Yahoo!’s products for which there is little to no publicly-available information. Unless Facebook has unlawfully acquired Yahoo! confidential business information, Facebook could not have developed a good-faith basis for many of the infringement allegations in its counterclaims.

Indeed, when I reviewed all of the patents Facebook was countersuing with, it was difficult to determine their validity of ones like Patent 6236978 because they claimed infringement by back end tech of Yahoo’s. Facebook therefore may essentially be guessing, meaning it “failed to perform a good faith investigation into its counterclaims prior to asserting them” to the court. This could cause several of Facebook’s patents, specifically No. 6,236,978, No. 7,603,331, No. 8,103,611, No. 6,411,949, U.S. Patent No. 6,216,133, and No. 6,288,717, to be thrown out.

5. Patents Facebook Is Countersuing With Were Illegally Filed

Yahoo says that Facebook patents No. 8,005,896 and No. 8,150,913 were improperly registered by Chris Cheah and C. Douglass Thomas. The inventors of the patents were improperly listed, and and additional filing was made to retroactively apply patent ’913 to social networking. Yahoo says therefore “Every claim of the ‘913 patent is unenforceable due to inequitable conduct and every claim of the ‘896 patent is unenforceable under the doctrine of infectious unenforceability.”

If the court concurs, these patents of Facebook’s could be thrown out, further weakening its bargaining position in a settlement.

In conclusion, Yahoo makes some powerful and well-backed claims today, but it will come down to whether it and Facebook believe a court would throw out most of Facebook’s countersuit. This “good faith” strategy from Yahoo is smart because no patents purchased after its initial infringement suit –whether from entrepreneurs and academics, the bundles it bought from IBM and Microsoft, or even future purchases from Sony or someone else, would save Facebook. Even if the risk of having its countersuit invalidated is low, it could be enough to force Facebook into a settlement.

Here’s today’s full filing from Yahoo:

Facebook had a choice to make: With just 56 patents to its name at the start of 2012 it could pay its way out of Yahoo’s infringement lawsuit with gobs of money and remain vulnerable to other patent attacks, or make a long-term investment into an intellectual property portfolio it could protect itself with for years to come.

Facebook has wisely taken the second path, upping its patent stockpile to over 1,400 with today’s $550 million cash purchase and licensing of 650 AOL patents from Microsoft today. These new patents cover email, instant messaging , web browsing, search, ads, mobile, and e-commerce, according to a source with direct knowledge of the purchase.

Surely, Facebook might have gotten better deals on this cache from Microsoft and the package of 75o patents it bought from IBM had it not been so desperate, but better late than never. Now with a healthy patent portfolio that I break down below, Facebook may be able to stop scrambling to buy IP, and can fend off the attack of any who would spoil and suck money from its IPO.

Really, Facebook should have predicted a patent lawsuit onslaught and beefed up its defenses a year ago. Riding boldly towards an IPO with such a tiny IP portfolio was brash, and perhaps too trusting. It had bought a few patents here and there from companies like HP, Friendster, BT, and Halliburton, but publicly only held around 60 issued patents as of a few months ago. Maybe it thought other tech giants would have more scruples, but it was essentially piling $100 billion+ in value into a rickety rickshaw instead of an armored car.

Lucky for it, though, Yahoo attacked just a bit too early, announcing in mid-March it would sue Facebook over ten mostly vague patents around social networking, communication, privacy, and advertising. Facebook snapped into action, buying 75o patents from IBM March 22nd. Because these were purchased in a state of emergency, IBM may have been able to command a higher price than it could have in times of peace, but Facebook had its back against the wall and had limited time and options.

Come April, Facebook filed a masterful counter-suit against Yahoo with ten patents invented by its employees including Mark Zuckerberg and a former Yahoo employee and that it had bought from academia and entrepreneurs. It was a cunning move that offset Yahoo’s attack while still making Facebook look like the victim.

Regarding Facebook’s Microsoft patent buy, Yahoo gave us the statement:

“Nothing about today’s action changes the fact that Facebook continues to infringe our patents. Companies who purchase patents are often working from a position of weakness and take these actions to strengthen their portfolio. We see today’s announcement as a validation of our case against Facebook.” 

Facebook likely had to overpay again, this time sending $550 million in cash to Microsoft for 650 of the 925 patents it bought last week from AOL (who owns TechCrunch) for $1 billion. Microsoft struck a great deal, as it will retain a license to all the patents it sold to Facebook.

The purchases are not likely to change Facebook’s defensive stance on patents, but its healthy portfolio and tough response to the Yahoo attack should deter future trolls. Facebook’s total portfolio of roughly 1,461 patents that we’re aware of now breaks down as such:

• 56 U.S. issued patents as of December 31, 2011 that it cited in the S-1 from employees and purchases, and 33 foreign patents
• 503 pending U.S. patent applications and 149 foreign patent applications cited in the S-1
• Roughly 5 patents purchased from NYU Professor Alexander S. Tuzhilin and San Jose entrepreneur Chris Cheah
• 750 patents from IBM
• 650 patents from Microsoft, formerly owned by AOL
• Any patents attained in its recent acquisitions of Instagram and TagTile

At this point, Facebook has likely built its walls high enough and may not make any other massive IP purchases in the near future. Now investors can confidently buy into the social network’s IPO, knowing Facebook has a thick suit of armor and a sword of its own for the next time someone tries to stab it in the back.

More big Facebook news from today:

Facebook’s Amended S-1: 901 Million Users, 500M Mobile, Paid $300M Cash + 23M Shares For Instagram

Facebook Buys AOL Patents From Microsoft For $550 Million In Cash

Zynga Contributed 15% of Facebook’s Revenue In Q1, Down From 19% A Year Ago

You Earn Facebook An Average Of $1.21 Per Quarter

[Image Credits: GameJoom, Jeff Scarterfield, Kqube] Updated to indicate what the patents bought from Microsoft cover.

Yahoo today reported its financial results for the first quarter of 2012, and after three years of declining annual revenues, the company looks like it may just be on track to stop the streak — or at least slow it down.

Yahoo posted first quarter revenue on a GAAP basis of $1.22 billion, up one percent from the $1.2 billion in GAAP revenue Yahoo reported in the first quarter of 2011 (which itself was down 25 percent year-over-year from its Q1 2010 revenue.) This is the first time Yahoo’s quarterly revenues have grown on a year-over-year basis since the third quarter of 2008.

At the bottom line, Yahoo’s performance was solid, with net income of $286 million, up 28 percent year-over-year from the $223 million the company reported in Q1 2011. Net earnings were 17 cents per diluted share. Overall, these results are largely in line with what Wall Street analysts expected from the company. Investors responded favorably to the news, pushing Yahoo’s stock price up 2.4 percent in after-hours-trading within the first hour after the Q1 results were posted.

The basic numbers are of course informative, but hearing how things are going from the horse’s mouth is always key. So we’re currently popping the popcorn and settling in for Yahoo’s quarterly earnings call, which is scheduled to begin at 2pm PT. This represents Scott Thompson’s first full quarter as Yahoo’s CEO, and it has certainly been an interesting one: Between the financial results announced today, co-founder Jerry Yang’s abrupt exit from the company in January, Yahoo’s major patent litigation with Facebook, the pressure it’s getting for a dramatic turnaround from activist hedge fund Third Point, Yahoo’s recent large-scale layoffs and subsequent management restructuring, and the relative success of so many other tech companies at the moment, there are sure to be some hot topics on deck for Yahoo’s quarterly chat with its shareholders and analysts. Check back for our coverage of that later this afternoon.

One would guess that the big Yahoo layoff-reorganization includes a culling of some the company’s weaker properties — and yes, we’re hearing today that this includes Music and possibly Movies, popular sites that don’t monetize well.

Word has been leaking out since last week, when Digital Music News wrote a well-sourced article that didn’t make the situation sound good. “Will there be a music-dot-yahoo-dot-com?,” it quoted one person as saying. “Yes. But will it be integral to the future success to Yahoo? No. Has the traffic been good? No. Has this content been consistently interesting to advertisers? No.”

We hear that this is correct — Music is going to be a shell of itself if it is not shut down completely. Its leaders are in the process of being let go, and aren’t being replaced, we’ve confirmed with a source. Music had around 25 million monthly uniques as of the end of last year, according to comScore.

A similar fate could be happening to other Entertainment properties, including Movies, another source says.

Update: “There’s absolutely no truth in the rumor that Yahoo Music is closing,” a spokesperson says, which isn’t exactly a rebuttal of this article. “Entertainment still continues to be a big focus for Yahoo.”

Ross Levinsohn, the newly-installed director of the widespread media division that includes these sites, is most interested in video, a third source adds, as it is better able to attract advertiser interest. Indeed, Yahoo’s sites have been able to produce a total of nearly 61 million U.S. unique visitors in February, according to comScore — a distant but still significant second to Google. There’s recent growth to add to the story, powered by the ABC News partnership.

More broadly, portal-driven sites like these have been supplanted over the years by social networks — first Myspace (which Levinsohn knows all about as he bought it for News Corp), then Facebook — and now mobile apps.

Yahoo has been plugging away at its music service for more than a decade and the rise and decline of that business is a cautionary tale in its own right. Yahoo first got its hands on the property back in 2001 when it bought Launch Media for $12 million. It added to that with a further acquisition: music playing, downloading and digitizing service Musicmatch, reportedly bought for $160 million.

Yahoo eventually branded the combined service as Yahoo Music in 2005. But with monetizing proving elusive for the service even then, when it was ranking as the web’s most popular music site, in 2008 it shut down the on-demand part of the business (Yahoo Music Unlimited) and signed a deal with Rhapsody to provide those services. The Rhapsody deal is still in place today.

One week after Yahoo announced it would lay off 2,000 employees, the company has now confirmed the second part of its restructuring: a reorganization that puts the company’s assets into three new business units — consumer, regions and technology, with at least one operation put to the side for a potential sale.

The announcement, revealed to the company in an all-hands meeting as well as an internal memo earlier today (first published by AllThingsD), was not released in a public statement, but TechCrunch understands that Scott Thompson, Yahoo’s new CEO, has put three different functions within the consumer division: media, “connections” (interactive and social businesses) and commerce. Regions meanwhile will oversee all of Yahoo’s ad business. And technology will provide the “science” and infrastructure that will underpin how the first two work.

All three underscore just how much work Yahoo has ahead:

Ross Levinsohn will be in charge of the media division. This will not only be the place where Yahoo’s own content operations will sit — that includes portals like Homepage, News, Finance, Sports, and Entertainment — but also the company’s newer forays into delivering content on behalf of other companies through the Yahoo Publishing Platform, which covers text- but also video-based content. (This might have been where, incidentally, it would have put Float, if that deal with Scribd had gone ahead.) It looks like the streaming video content is where Yahoo hopes to be banking the most activity, around upcoming events like the Olympics and the U.S. Elections. It’s also where so many others are moving, too, so the big question is whether Yahoo will be able to offer something in the quality or experience stakes above what we might see elsewhere.

“Connections“, or Yahoo’s different interactive and social properties, are going to be led by Shashi Seth, and cover services like Mail, Messenger, Flickr and Answers. To be sure, this is a challenging area for Yahoo, because it encompasses services where Yahoo has been relatively successful — Mail, Flickr and Answers — but has also failed to capitalize — social, where one of its most controversial recent acts has been not to launch a new product but a patent suit against Facebook. There are some interesting things underway with what Yahoo is trying to do — for example, with some new technology in its IntoNow social TV app (more on that later) — but again this is about whether Yahoo is doing something better that others are working on, too. It helps that Yahoo already has a big audience in other consumer divisions.

One intriguing new territory for Yahoo is its new commerce division. This does not yet have a named head (although AllThingsD has pegged Sam Shraugher from PayPal to lead it), and it will put all of the company’s existing divisions where commerce already happens. That includes Autos, Shopping, Travel, Jobs, Personals and Real Estate.

While while there may be new e-commerce ventures in the cards for Yahoo — it seems natural, given Thompson’s own background from PayPal and the fact that this is a $224.2 billion market this year — this is not something that the company is focusing on today. “We must focus all we do on the users who trust us to give them personalized content and communications, and the advertisers who want to connect with our users,” said Thompson in a memo to employees. “To be very clear, our highest priority is winning in our core business and that will earn us the right to pursue new growth opportunities.”

Advertising, which will now be in the regions division, is equally challenging: As the market for online advertising continues to grow, Yahoo has seen a big decline in its share of it. Last year, according to eMarketer, Yahoo’s share stood at only 9.5 percent for all online ad revenues, down from a 15.7 percent share in 2009. And 2012 is a case (at best) of “it’s going to get worse before it gets better”: Yahoo’s share will only be 7.4 percent this year. The U.S. online ad market is expected to be worth $39.5 billion this year, up 23.3 percent over 2011.

Display ads, where Yahoo has been strongest traditionally, is where it’s getting hardest hit: Yahoo’s share in U.S. display was only 10.8 percent in 2011, down from its peak of 18.4 percent in 2008. Facebook has overtaken it and now has a 14 percent share of display ad revenues in the U.S., says eMarketer.

It’s telling that Rich Riley has been brought back to the U.S. to lead up the Americas team: he oversaw some very strong growth in Europe. Rose Tsou continues to lead Asia Pacific, and Europe/EMEA is now looking for a new head, with Christophe Parcot leading in the interim.

Lastly, technology. This is a touchy area, with Yahoo having let go a number of people who were at the center of its R&D efforts, with some speculating talent migrations to Facebook and others to Detroit… Wherever it is, it ain’t Sunnyvale.

You have assume for now that Thompson and his advisers have a bigger plan here, and are focusing on teams and products that haven’t been decimated by the restructuring announced last week. Areas that will continue to remain a focus for the tech team are the areas of user analytics, content optimization, personalization and monetization.

Last week, Yahoo announced that it would cut 2,000 jobs. Given the employee shortage in Silicon Valley, most of the qualified engineers that lost their jobs in this round of cuts will likely land on their feet pretty quickly. For those who just had enough of the Valley, though, Detroit-based Quicken Loans and its family of companies is offering these former Yahoo employees (and anybody else who wants to apply) a chance to move to the Motor City to “be part of something really big.” Quicken, together with Detroit Venture Partners, Rockbridge Growth Equity and Fathead.com, has set up ValleytoDetroit.com to entice Silicon Valley engineers to apply for jobs at their companies and move to Detroit.

The plan here is to offer those who apply an expedited hiring process. The companies will start interviewing applicants immediately and fly final candidates out to Detroit soon after.

Detroit Venture Partners’ CEO and managing partner Josh Linkner argues that there are about 12 start-ups in his company’s portfolio that “would be attractive to those looking to regain the excitement of working in a creative, collaborative and entrepreneurial environment.” Quicken Loans’ CEO Bill Emerson also appeals to the potential applicants’ patriotism by noting that “not only does Detroit make for a great place to start or grow a business, but it’s also a great option for those who want to be on the ground-floor of rebuilding and reinventing a great American city.”

As there is no shortage of engineering jobs in the Silicon Valley right now, it remains to be seen how many of Yahoo’s former employees and other engineers will actually take this offer seriously. There can be little doubt, though, that Detroit is going through a bit of a renaissance lately and as its startup scene continues to grow and as the car industry continues to add more high-end technology to its products, the demand for qualified engineers in the Motor City is destined to increase sharply. Just last week, Twitter announced that it would open a small office in Detroit’s historic Madison Building, which already houses a tech and business incubator — and a fantastic rooftop bar overlooking the Detroit Tigers stadium.

This just in: one chapter of AOL’s patent journey is coming to an end. The company is selling 800 patents to Microsoft for just north of $1 billion: $1.056 billion in cash to be exact.

Tim Armstrong, the CEO of AOL (which owns TechCrunch), says that the company will continue to hold on to about 300 patents and patent applications after the sale. These span “core and strategic technologies” around advertising, search and content generation, he noted in a memo to employees. [Full memo below the break.]

The sale to Microsoft came after a “competitive auction process” the company noted in a statement. It also includes the sale of the stock of an AOL subsidiary (unspecified which in the statement) “upon which AOL expects to record a capital loss for tax purposes and as a result, cash taxes in connection with the sale should be immaterial.”

AOL also said it “expects to utilize approximately $40 million of its existing deferred tax assets, representing approximately 20 percent of its total deferred tax assets, to offset any ordinary income taxes resulting from the license of its remaining patent portfolio.” We have reached out to try to get more specifics on the subsidiary and so licensee information for the remaining patents.

The sale is expected to be completed by the end of 2012.

The patent sale marks the end to a lot of speculation around what AOL would do with its patent trove. There had been pressure from shareholders, led by Starboard Value, to realize some of the value from those patents, starting last year, when investors began to grumble that the company was not focused enough on what it could be doing to make more money, and not monetizing fast enough on its growing media portfolio (of which TC is a part…).

The patents also came into question in March with the news that Yahoo was suing Facebook over several patent infringements.

Given that AOL’s portfolio also stretches into similar areas of social media and information organization, there were questions of whether AOL would also follow suit in a march to the courts — another route to realizing value from those patents.

The portfolio sold today patents related to advertising, search, content generation/management, social networking, mapping, multimedia/streaming and security, among other things. AOL has also received a perpetual license for all the patents as part of the deal, Armstrong said in his memo.

The sale not only neutralizes the possibility of AOL using those patents in a litigious way against Facebook (or others as the case may be), but it may also mean that Facebook is out of infringement hot water, as far as those patents are concerned: Microsoft became a shareholder in the company when it bought a 1.6 percent stake of Facebook back in 2007 for $240 million.

The question of what Microsoft intends to do with these patents is the next big question. Among the patents are several related to mobile and internet messaging (via AOL’s acquisition of ICQ). Others cover areas like location-based services and personalized content delivery. The most patents of all, however, come in the generic category of “online communications”, according to analysis from Envision IP.

The full memo:

As we continue to execute on our strategy of building premium brands, services, and advertising into world-class businesses, we also continue to unlock value in our assets that make the company stronger and show meaningful gains for AOL employees and shareholders.  Today, I’m excited to share that we achieved another critical milestone in our growth trajectory.

This morning, we announced that we’ve agreed to sell 800 of our patents and their related applications to Microsoft for $1.056 billion in cash. Most importantly, for the future growth trajectory and innovation for our business, we will continue to hold a significant patent portfolio of over 300 patents and patent applications spanning core and strategic technologies, including advertising, search, content generation/management, social networking, mapping, multimedia/streaming and security among others. AOL also received a perpetual license to the patents being sold to Microsoft, which allows us to continue to innovate and drive strategic growth across all areas of our business.

This process of unlocking the value of our patent portfolio, that we began last fall, is a significant example of focusing our time and energy around strengthening our company’s balance sheet and unlocking value for our shareholders. Most importantly, this is another step forward for the comeback of AOL and allows us to remain laser-focused on our strategy and future growth. As always, we know that our growth will be driven by the successful execution against our strategy and we will continue to take aggressive steps to move the company forward.

Huge thanks to the teams that worked tirelessly during this intense process – their world-class effort resulted in a big win for our company. The AOL Board of Directors, Legal, Finance and Tax teams, and our outside advisors were super-stars. We are a partnership company and our team stayed together every step of the way and performed at the top of their game.

Additionally, we worked with a great Microsoft team on this deal – they were organized, professional and smart. When I spoke to Steve Ballmer over the weekend I commended him on his team and how great they were to work with in this process.

We will be holding a global employee call on Wednesday at 11am ET to talk about the news we have announced today in detail, as well as discuss our company goals for Q2, top box priorities and hear updates from our leadership team on progress we are already making in Q2. We’re already seeing strong momentum this quarter on our focus areas. Details for the call will be posted to the Inside, and please bring your questions as we’ll have time for Q&A.

Time to get back to the core business – delighting consumers and customers.  We are starting Q2 off with a major win.  Let’s keep it going and nail all of our Q2 goals – looking forward to reviewing with all of you on Wednesday on our global call.

Go AOL – TA

Facebook has executed a masterful response to Yahoo’s patent trolling that protects it legally but still makes it look like the victim. Here I examine how for almost every patent Yahoo claims Facebook infringes upon, the social network has countersued with a stronger, more specific patent for content feed sorting, advertising, and privacy.

Facebook will maintain the moral high ground, and likely bypass a costly settlement. But there’s none of Facebook’s blood in the water, nothing for the sharks to circle. It could have gone much worse.

When Yahoo announced its attack, Facebook didn’t surrender and pay up like Google did back in 2004. It chose the smartest of the four defenses outlined by Chris Dixon and others.

It refused to settle and pay out valuable stock to close the case before its IPO, which would have shown weakness and encouraged further trolling by Yahoo and others. It didn’t go silently to trial, and risk a massive damages judgement. Nor did it stoop to Yahoo’s level and lash back at full force, suing Yahoo for every Facebook patent it infringed on.

Instead it looked through its limited patent portfolio and as Ars Technica points out, probably bought some more at the last minute, to trump each of Yahoo’s claims. It countersued with these, and brandished just one extra sword to seal the deal. That’s Facebook’s patent of people tagging in photos, a core innovation that propelled it to popularity, and that Yahoo’s Flickr blatantly copied.

Facebook likely has more patents it could have attacked with, but it didn’t want to turn the tables and go on the offensive. It was sued with 10 patents, so it countersued with 10 patents. As its General Counsel Ted Ullyot said, “we do so in response to Yahoo’s short-sighted decision to attack one of its partners and prioritize litigation over innovation.” Facebook didn’t start this fight, but it’s ready to bear arms to end it. (For a timeline of the Yahoo vs Facebook war to date, read the last paragraphs of my piece from yesterday. It also includes the full text of Facebook’s countersuit filing)

Now Facebook appears as the champion of invention and the ideals of Silicon Valley, and further vilifies Yahoo. As CNET reports, prominent figures like SoftTech VC Jeff Clavier and vocal opponents of patent trolling like Yammer CEO David Sacks are now rooting for Facebook. It doesn’t help that Yahoo stabbed Facebook in the back while relying on it for easy login and referral traffic.

Below I examine in detail the meaning of each of the patents Facebook is countersuing with, and compare their validity with the Yahoo’s claims. In all but one patent category, privacy, Facebook’s either has the upper hand or stands on near equal footing. If Yahoo does infringe on Facebook’s patents, it may have been making millions of dollars a year in ad revenue thanks to improved ad targeting, and increased engagement from Flickr photo tagging and news site home page content relevance. Those could turn into damages awarded to Facebook or offset the money Facebook made from infringing on Yahoo’s patents.

Whether the cases go to trial or private negotiation, Facebook might walk away clean. Even if Yahoo does come away with a settlement, the whole debacle won’t have been nearly as lucrative as if Facebook hadn’t countersued. Meanwhile, no matter the outcome, Yahoo hangs its head in shame.

Here are the 10 patents Facebook is countersuing Yahoo with, compared to the corresponding patents Yahoo is suing Facebook with:

Generating a Feed of Stories Personalized for Members of a Social Network

AKA The news feed, with stories about friends weighted by affinity

U.S. Patent No. 7,827,208. Inventors: Current and former Facebook employees Andrew Bosworth (Director Of Engineering), Chris Cox (VP of Product), Ruchi Sanghvi (Now at Dropbox), Thyagarajapuram S. Ramakrishnan (Formerly of Yahoo), Adam D’Angelo (Former CTO, now at Quora)

Abstract: Systems and methods for generating dynamic relationship-based content personalized for members of a web-based social network are provide…Further exemplary methods comprise weighting by affinity.

Facebook claims that Yahoo’s Flickr Photostream, Recent Activity and Groups Activity on the Yahoo! Flickr photo sharing service copy its news feed. Flickr does show a personalized feed of content from one’s contacts, and may sort it by affinity.

The patent counters Yahoo’s vague “Dynamic Page Generator” patent which technically covers all personalized web content. Facebook’s patent is much more specific, referring to relationships as the source of content and affinity weighting as the sorting method

If Yahoo’s patent is enforceable, most of today’s most popular websites would also infringe upon. Because Yahoo’s patent is more likely to be ruled invalid, Facebook has the upper hand here.

Tagging Digital Media

Friend tagging in photos

U.S. Patent No. 7,945,653. Inventors: Mark Zuckerberg (CEO), Aaron Sittig (Design Strategy Lead), Scott Marlette (Original Product Manager of Facebook Photos). Filed Oct 11, 2006, issued May 17, 2011

Abstract: A method for tagging digital media is described. The method includes selecting a digital media selecting a region within the digital media. The method may further include associating a person or entity with the selected region and sending a notification of the association the person or entity or a different person or entity. The method may further include sending advertising with the notification.

Photo tagging was a key early innovation for Facebook that launched in 2005 and drove massive user and engagement growth. It’s become one of the defining features of the service.

Flickr added people tagging to its service in 2009, and answered a common complaint about Facebook Photos by allowing users to opt out of being tagged. Facebook claim’s Flickr’s “People in Photos” feature violates this patent, and indeed, Flickr’s tagging works almost exactly the way Facebook’s patent describes.

This is Facebook’s one claim that doesn’t have a Yahoo counterpart. It was likely included as negotiation insurance in case its other responses fail to offset Yahoo’s attacks, and to fight Yahoo’s infringement claim for its unified messaging patent, which I’ve written could be Yahoo’s most valid claim against Facebook.

Headline Posting Algorithm

AKA Sorting a content feed by matching content to a user’s interests

U.S. Patent No. 6,288,717. Inventor: Terry Dunkle (HealthScout). Filed Mar 19, 1999, issued Sept 11, 2011.

Abstract: The program uses the topic interest flags to determine which articles and other customizable elements of the the database are shown on a particular member’s home page. The headline posting algorithm first checks the flags on every available item against the member’s interests, recorded in his or her user profile, then weighs the importance, rarity, and significance of each match it has found, and finally displays the three highest-scoring items on the member’s home page in descending order of value.

This patent was seemingly purchased by Facebook from Dunkle, who invented it to power his personalized health news network HealthScout. It could cover Facebook’s EdgeRank news feed sorting algorithm which determines what order to display news feed stories in to maximize relevance.

Facebook claims that all of Yahoo’s home pages that use its Content Optimization and Relevance Engine (C.O.R.E) to sort content for display infringe on this patent. The patent specifically covers the process of a user selecting content categories they’d like to see and then receiving matching updates, which Yahoo uses to customize it’s home pages.

The “Headline Posting Algorithm” patent is another more specific version of Yahoo’s “Dynamic Page Generator” patent, and could be more enforceable, giving Facebook an advantage.

Method for Enabling a User to Fetch a Specific Information Item from a Set of Information Items and a System for Carrying Out Such a Method

AKA Efficiently creating ad targeting profiles

U.S. Patent No. 6,216,133. Inventor: Judith F. M. Masthoff. Filed May 30, 1996, issued April 10, 2001.

Abstract: A user of a system comprising a large set of information items, for example a multimedia database, is assisted by an agent in searching the set. The agent has a given affinity for the information items and selects a specific information item from the set in conformity with said affinity. On the basis of the interactions between the user and the system an image is formed of the affinity of the user for the information items. The agent utilizes this image, in addition to its own affinity, for the selection of a specific information item. A major application of the invention concerns a system in which the information items are presented as objects in a space and in which the agent guides the user through the space and proposes a specific object to the user.

This patent defines creating “agents” that mirror the preferences of the users they represent. These agents can then be used to predict which ads or content will be be most relevant to a user and then displaying them.

Facebook claims that advertisements on Yahoo’s news and Flickr properties infringe on this patent. Yahoo may use this type of technology to assess which ads are most likely to be clicked based on a user’s preferences. The validity of the claim  and the advantage will depend on how Yahoo actually creates ad profiles, but the patent could help Facebook combat Yahoo’s ad sorting patents.

Customizing Database Information for Presentation with Media Selections

AKA Providing personally relevant contextual information alongside media

U.S. Patent No. 6,411,949. Inventor J. David Shaffer. Filed Aug 12, 1999, issued Jun 25, 2002.

Abstract: Enhanced content data is supplied in association with a media selection. The enhanced content data is customized responsive to a user profile. The uncustomized enhanced content is stored as a data structure having levels of nodes. Each node within a given level represents an alternative version of a shared enhanced content sub-topic. A processor chooses between nodes within the levels and assembles the chosen nodes to produce the customized enhanced content data.

While the abstract is vague, the patent essentially covers providing contextual information alongside a piece media such as a photo, video, sound, 0r text. Depending on a user’s listed interests, they might see different information. For example, alongside a song by the band U2, a user with a high stated  interest in band might see recent news about its members, while a users who are tagged as musicians would see notes on the band’s musical technique. There’s also some substantial back-end technology regarding how to store contextual data in a graph structure.

Facebook uses a similar technology to show the faces of friends who’ve interacted with a piece of content or an ad. Facebook claims that ads across Yahoo’s news sites and Flickr violate this patent. This is one of the more vague patents Facebook cites, but it could pertain to Yahoo’s social ads that display marketing messages alongside the news users read. It could offset Yahoo’s ad sorting patent claim against Facebook.

System and Method for Dynamic Profiling of Users in One-to-One Applications, and, Architectures, Systems, Apparatus, Methods, and Computer- Readable Medium for Providing Recommendations to Users and Applications Using Multidimensional Data

AKA Serving relevant ads based on biographical and behavior information

U.S. Patent No. 6,236,978. Inventor: Alexander S. Tuzhilin (Professor Of Information Systems, NYU). Filed Nov 14, 1997, issued May 22, 2001. And U.S. Patent No. 7,603,331. Inventors: Alexander S. Tuzhilin, Gediminas Adomavicius (Associate Professor of Information and Decision Sciences, University of Minnesota). And, U.S. Patent No. 8,103,611. Inventors: Alexander S. Tuzhilin, Gediminas Adomavicius. Filed Sep 3, 2009, issued Jan 24, 2012.

Abstract ’978 and ’331: A system and method for generating a user profile for a user based on a static profile and a dynamic profile of the user. The static profile includes factual user information. The dynamic profile includes dynamic rules which correspond to transactional information of the user. The method and system compresses the dynamic rules into aggregated rules so that the user can view a comparatively small number of the aggregated rules and select the desired rules from the aggregated rules based on user-desired criteria. The dynamic rules associated with the particular user are matched to the selected desired aggregated rules to generate the dynamic profile. The static and dynamic profile are then combined to form the user profile. The system and method can be used in conjunction with a Personal Shopping Assistant system and a Personal Intelligent Digital Assistant system.

Abstract ’611: Exemplary non-transitory computer-readable medium, method and system for providing at least one recommendation to users and applications using multidimensional data. The multidimensional data can define a multidimensional space defined by a Cartesian product of the dimensions. The multidimensional space can have at least three dimensions, and each of the dimensions can be capable of (i) providing variable information, and (ii) having a type that is different from a type of another one of the dimensions. The exemplary non-transitory computer-readable medium, method and system can retrieve information from data associated with the multidimensional space. Further, the exemplary non-transitory computer-readable medium, method and system can generate the at least one recommendation based on the retrieved information. Further, at least one of the dimensions can include profiles.

These three patents define combining static, biographical user information with dynamic behavior information to efficiently create rules for predicting user preferences, and then generate recommendations. In the context of advertising, this technology could be used to predict what ads will resonate with users at what times to maximize click and conversion rates, and then show users those ads.

Facebook claims Yahoo’s ad systems infringe on these patents. While it’s difficult to tell whether this is true, Yahoo likely employs some sort of ad targeting profiling which could be covered. Facebook could use this patent to offset the three ad sorting patents Yahoo is suing it with, though Facebook’s patents are slightly more general than Yahoo’s slightly more ad-focused patents.

System for Controlled Distribution of User Profiles Over a Network

AKA Friending and privacy by friend list or characteristic

U.S. Patent No. 8,005,896. Inventor: Chris Cheah. Filed Jun 17, 2010, issued Aug 23, 2011. And U.S. Patent No. 8,150,913. Inventor Chris Cheah. Filed on August 22, 2011, and granted April 3, 2012.

Abstract: An information management and distribution system is disclosed. The information management and distribution system facilitates the controlled exchange of contact information over a network. The system can support one or more of creation and design, rolodex, exchange, and update features. In one embodiment, the information management and distribution system can include a networked server system accessible by remote user devices via the network, and at least one database maintained by the networked server system and storing content information and exchange settings of registered users.

These patents define the ability for users to “friend” each other on a social network and give each other access to up-to-date personal and contact information. It also covers privacy settings where users can set certain personal information as accessible only to people in a certain category. Facebook uses this technology to allow users to connect to each other, and to power its friend list and “privacy bucket” (only me, friends, friends of friends, public) privacy settings.

Facebook claims that the  the ability to establish relationships with other users and set privacy settings on the Yahoo! Flickr photo sharing service” infringes on this patent. Flickr allows users to set their photos as visible to categories of people such as friends or family. These patents are likely intended to offset the privacy control patent Yahoo has sued Facebook with. This is the one Yahoo patent that is more specific its Facebook counterpart, and where Facebook infringes more clearly than Yahoo does. Facebook’s photo tagging patent could come in handy to nullify this Yahoo advantage.

[Image Credit: Daren Horwood, Stowe Boyd]

Yahoo has made its massive round of layoffs official. The company just released a statement saying that 2,000 jobs have been cut, or 14 percent of it total workforce (which was previously around 14,000). We’ve pasted the release below.

“Today’s actions are an important next step toward a bold, new Yahoo! – smaller, nimbler, more profitable and better equipped to innovate as fast as our customers and our industry require. We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities. Our goal is to get back to our core purpose – putting our users and advertisers first – and we are moving aggressively to achieve that goal,” said Yahoo’s CEO Scott Thompson. “Unfortunately, reaching that goal requires the tough decision to eliminate positions. We deeply value our people and all they’ve contributed to Yahoo!.”

Yahoo says that it will save $375 million upon completion of the layoffs. The company currently expects $125 to $145 million in a pretax cash charge relating to employee severance packages.

As AllThingsD’s Kara Swisher reported yesterday, the layoffs will extend throughout the entire company, but the product division is expected to be hit the hardest. Yahoo will also announce a new reorganization of the company in the near future. And this may not be the end of the road for Yahoo in terms of layoffs. Swisher says that as Yahoo consolidates its businesses and strategy, more employees could be let go.

This is one of the largest round of layoffs for Yahoo in recent years. In December 2010, Yahoo cut 4% of its global workforce, which amounted to 560 employees.

Best of luck to those Yahoo employees affected by today’s news.

Yahoo! today confirmed that it is taking important next steps to reshape the company for the future.

“Today’s actions are an important next step toward a bold, new Yahoo! – smaller, nimbler, more profitable and better equipped to innovate as fast as our customers and our industry require. We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities. Our goal is to get back to our core purpose – putting our users and advertisers first – and we are moving aggressively to achieve that goal,” said Scott Thompson, CEO of Yahoo!. “Unfortunately, reaching that goal requires the tough decision to eliminate positions. We deeply value our people and all they’ve contributed to Yahoo!.”

Yahoo! has a solid foundation – nearly 700 million users and thousands of advertisers that engage with Yahoo! properties regularly and trust the company with their data and their business. Through its restructuring efforts, Yahoo! intends to grow by responding more quickly to customer needs and competing more effectively in areas where it can win. Yahoo! has identified key parts of the business – a select group of core businesses, the platforms that support those core businesses, and the data that drives deep personalization for users and ROI for advertisers – where the company will intensify efforts and redeploy resources globally, all focused on increasing shareholder value. With a clear focus on profitability and growth, the company will be disciplined in its investments and radically simplify how it builds, launches and maintains many of its properties and products.

Today, the company will begin the process of informing employees about these changes. As part of that effort, approximately 2,000 people will be notified of job elimination or phased transition.

Yahoo! expects to realize approximately $375 million of annualized savings upon completion of all employee transitions. The company currently expects to recognize the majority of an estimated $125 to $145 million pretax cash charge relating to employee severance in its second quarter financial results. The company may incur additional charges in connection with this action. More information will be provided about Yahoo!’s future direction in conjunction with the release of its first quarter financial results on April 17, 2012.

Well, it’s been an eventful last few months for Yahoo, hasn’t it? Remember it was just six months ago that Carol Bartz was fired from her position as CEO, and the Yahoo Board created a circle of elders to decide the company’s fate. Then, early this year, Scott Thompson (formerly of PayPal) was appointed CEO, and Yahoo Co-founder Jerry Yang stepped down from the board in mid-January. Then, a month later, Yahoo officially announced its plans to go after Facebook.

Today, the activity continues, as Yahoo has announced it is appointing three new independent board directors, whose roles become effective on April 5. This is all in spite of the fact that Dan Loeb and Third Point have been trying to drum up shareholder support in favor of their own roster of board members — they don’t think Yahoo’s current board has what it takes to pick the right people to turn the company around. Today’s new appointees include: John D. Hayes, EVP & CMO of AmEx, Peter Liguori, former COO of Discovery Communications and Chairman and President of Entertainment at Fox Broadcasting, and Thomas McInerney, the outgoing CFO of IAC.

Why this move? Well, here’s the statement from Chairman of the Board, Roy Boystock:

Yahoo! is moving aggressively to increase shareholder value. We have appointed a capable and dynamic CEO who is driving the business towards its next era of success. And we have reconstituted the Board of Directors with the right mix of experience and expertise to help Yahoo! build upon its very strong assets and brand base to take advantage of the opportunities ahead.

But, really, this is a result of the board taking an aggressive stance on the actions of “activist shareholder” Dan Loeb, who has been trying to push his way onto the board — and has previously spent $1 billion to own 6 percent of Yahoo. Loeb proposed his own four board members, which the board has now basically rejected. The board then, wanting to avoid a proxy fight, agreed to take on Harry Wilson and another member which they would work out with Third Point, but according to the statement, Loeb rejected that offer and tried to place himself on the board instead.

So, Yahoo’s board is apparently moving on and saying, “tough luck, Dan”:

Based on the Nominating and Corporate Governance Committee’s thorough review of a broad range of candidates and their qualifications, including Third Point’s nominees, the Board determined that other candidates were more qualified for the position.

The three new appointees join Fred Amoroso, the former Rovi CEO, and LiveOps Chairman Maynard Webb (former COO of eBay), to round out Yahoo’s five open board spots. Obviously, this includes the recent resigning of Jerry Yang, and apparently Chairman Roy Bostock will also be stepping down. Now it’s up to the new board to decide who’s going to become Chairman. It will also be up to them to deal with the proxy fight that’s coming, as Kara Swisher has pointed out that Loeb has indeed filed a preliminary proxy statement with the SEC.

Third Point thinks that Yahoo’s hand-picked new board members aren’t going to help the company turn itself around, and a proxy fight is likely just getting started. Oh, Yahoo.

Here’s the rest of the board’s statement below:

Yahoo, the premier digital media company, today announced that its Board appointed three new independent directors, effective April 5, 2012: John D. Hayes, Executive Vice President and Chief Marketing Officer of American Express Company; Peter Liguori, former Chief Operating Officer of Discovery Communications, Inc. and former Chairman and President of Entertainment of Fox Broadcasting Network; and Thomas J. McInerney, the outgoing Chief Financial Officer of IAC/InterActiveCorp.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations”
“Each of these individuals impressed the search committee with their demonstrable records of significant accomplishment at the highest levels of media, advertising and marketing, finance, including corporate finance and restructuring, and further insight into customers’ perspectives. Together, they bring a powerful mix of exactly the right ingredients to fuel Yahoo!’s forward momentum. Having thoroughly reviewed a broad range of highly qualified candidates and sought input from a number of major shareholders, the Committee enthusiastically recommended to the full Board the appointment of these three excellent directors,” said Patti Hart, chairman of the Board’s Nominating and Corporate Governance Committee, which conducted the search process.

Roy Bostock, Chairman of the Board, added, “Yahoo! is moving aggressively to increase shareholder value. We have appointed a capable and dynamic CEO who is driving the business towards its next era of success. And we have reconstituted the Board of Directors with the right mix of experience and expertise to help Yahoo! build upon its very strong assets and brand base to take advantage of the opportunities ahead.”

The Nominating and Corporate Governance Committee conducted the search process in conjunction with a leading professional search firm and identified, interviewed and evaluated a wide range of candidates, including Third Point’s nominees. Following completion of the Committee’s evaluation process, the Committee and the Board determined that the group of candidates announced today were the best qualified, based particularly on their individual accomplishments and records of value creation in other positions with specific relevance to Yahoo!’s business and its opportunities.

At the same time, in view of Third Point’s significant ownership position and the qualifications of Harry Wilson, the Board concluded that it was appropriate to propose that Mr. Wilson and a second individual mutually acceptable to both Third Point and the Yahoo! Board of Directors, outside of the other Third Point nominees, join the Board in settlement of Third Point’s solicitation. In addition, the Board believed that there is value in avoiding the cost and distraction that inevitably accompanies a proxy fight, and determined that this proposal was in the best interest of all of its shareholders to avoid that expenditure of resources. Third Point founder and Chief Executive Officer Daniel Loeb rejected this proposal and declined to end Third Point’s solicitation with respect to its own four candidates unless he personally was appointed to the Board. Based on the Nominating and Corporate Governance Committee’s thorough review of a broad range of candidates and their qualifications, including Third Point’s nominees, the Board determined that other candidates were more qualified for the position. The Board remains open to hearing Third Point’s ideas and to working constructively with Third Point, but believes that appointing Mr. Loeb to the Board is not in the best interest of the Company and its shareholders.

The Board continues to believe that the Company needs to move quickly to implement change and improve its performance. The Yahoo! management team is moving with a sense of urgency to reshape and refocus the Company on its core strengths, with an emphasis on redeploying resources to the most productive areas and equipping the Company to invest in growth and innovation. As now constituted, the Board has a well-rounded combination of financial, media, advertising, marketing, operating and technology expertise necessary to bring the right leadership to build value for all Yahoo! shareholders.

Mr. Hayes, one of the nation’s most innovative marketing executives with an expertise in digital marketing, has served as Chief Marketing Officer at American Express since 2003, overseeing that company’s marketing strategies and product development, as well as its global marketing, market research and publishing organizations. Prior to that, he served for eight years as American Express Executive Vice President, Global Advertising and Brand Management, responsible for brand marketing worldwide. He began his career in the brand and advertising industry and, among his senior positions, he served as President of Lowe & Partners where he led that firm to unprecedented growth through the development of product position and global campaigns for several major corporate clients.

Mr. Liguori served as Chief Operating Officer of Discovery, the leading non-fiction media company in the world, through 2011. Prior to that, he served as Chairman and President of Entertainment for Fox Broadcasting Company. Previously, he was President and CEO of FX Networks, NewsCorp’s flagship entertainment cable network. He also served in a series of positions with Home Box Office, including as Vice President, Consumer Marketing where he had responsibility for marketing efforts supporting the HBO brand and HBO original movies. He began his career in the advertising industry, including positions at Saatchi & Saatchi, Compton and Ogilvy & Mather Advertising with clients such as Procter & Gamble and Unilever. He currently serves on the boards of The Topps Company, Inc. and MGM Studios.

Mr. McInerney served as Executive Vice President and Chief Financial Officer of IAC from January 2005 to March 2012. From January 2003 through December 2005, he was Chief Executive Officer of IAC’s Retailing sector. Prior to that time, Mr. McInerney served as Executive Vice President and Chief Financial Officer of Ticketmaster and its predecessor company, Ticketmaster Online-Citysearch, Inc. He also worked as an investment banker at Morgan Stanley for 11 years, working with a wide variety of public companies across several industries, advising on restructuring, M&A, IPO and other capital-raising activities. He also serves on the boards of HSN, Inc. and Interval Leisure Group, Inc.

Earlier this year, independent directors Alfred Amoroso and Maynard Webb were appointed to the Board. With today’s appointments, the Board has added a total of five new highly qualified independent directors this year. It is expected that the majority of directors will be new to the Board in 2012 following this year’s Annual Meeting of Stockholders, and that the entire Board will be new since January 2010. As previously announced, four directors volunteered not to stand for re-election at the next annual meeting, and an additional director resigned from the Board earlier this year.

Important Additional Information

Yahoo! will be filing a proxy statement with the SEC in connection with the solicitation of proxies for its 2012 annual meeting of stockholders. Stockholders are strongly advised to read Yahoo!’s 2012 proxy statement (including any amendments or supplements thereto) when it becomes available because it will contain important information. Stockholders will be able to obtain copies of Yahoo!’s 2012 proxy statement, any amendments or supplements to the proxy statement, and other documents filed by Yahoo! with the SEC in connection with its 2012 annual meeting of stockholders for no charge at the SEC’s website at www.sec.gov.

Yahoo!, its directors, executive officers and certain employees may be deemed participants in the solicitation of proxies from stockholders in connection with Yahoo!’s 2012 annual meeting of stockholders. Information concerning the ownership of Yahoo! securities by Yahoo!’s directors and executive officers is included in their SEC filings on Forms 3, 4 and 5, and additional information is also available in Yahoo!’s proxy statement for its 2011 annual meeting of stockholders filed with the SEC on April 29, 2011. Information regarding Yahoo!’s directors, executive officers and other persons who may, under rules of the SEC, be considered participants in the solicitation of proxies for the 2012 annual meeting of stockholders, including their respective interests by security holdings or otherwise, also will be set forth in the definitive proxy statement for Yahoo!’s 2012 annual meeting of stockholders when it is filed with the SEC.

Facebook has confirmed it is buying up a boatload of patents from IBM — 750 in all — that will help the company shore up against potential legal attacks from Yahoo and other companies claiming the huge social network infringes on their intellectual property.

But for the past couple of years, Facebook has already been taking steps to build up its patent portfolio through the acquisition of patents from a host of other players, from large IT companies, to a patent troll and a defunct social network. And a few surprises. A closer look at this gives some clues as to why it’s so important for Facebook to acquire patents rather than try to build up the portfolio itself.

Of the 60 patents that Facebook now owns that are listed with the U.S. Patent and Trademark Office — among a list of 160 in all, counting both applications for and assigned patents — there are 15 from Facebook itself; and nine patents from HP, 11 originally from Philips Electronics (but sold to IPG and then sold by IPG to Facebook), three from UK telecoms operator BT, nine from patent holder Walker Digital, one from Divan Industries, one from Applied Industries and 11 from Friendster — the pioneering social network that died a Facebook death and eventually got sold to Malaysian company MOL, which turned it into a gaming network. These were reportedly bought for $40 million in 2010.

The patents cover a wide range of areas. Some are very much in the wheelhouse of what we know as Facebook today — managing social relationships, newsfeeds and contacts, for example. Some are about technical processes that happen behind the scenes.

And some seem to cover functions that Facebook doesn’t really offer today. One relates to playlists for music or other media (“Method and apparatus for priority-based jukebox queuing”, patent number 6421651). Others seem to have a distinct e-commerce bent (“Systems and methods wherein a buyer purchases products in a plurality of product categories”, 7188080; “Method, computer product and apparatus for facilitating the provision of opinions to a shopper from a panel of peers”, 7526440).

(At first, I wondered if this pointed to areas where Facebook wants to potentially offer services — a marketplace seems to make perfect sense, for example. One, possibly ligitation-minded, patent lawyer gives me another opinion: “One thing we teach new companies is not to buy patents in their domain but in competitors’ domains where they can do most harm in lawsuit,” he says. “My expected competitor [eg] is Google, so I buy in areas like search, computing centers, and e-commerce to hurt them.”)

Indeed, the U.S. Patent Office also lists another 100 patent applications that have yet to be either approved or formally rejected. Many of these have been initiated by Facebook itself.

Yet there are also some that Facebook has picked up while they are still pending. These include four more patents originally owned by Friendster and one more e-commerce patent from Walker. And surprisingly, one from the energy and services giant Halliburton, related to data centers (“Cooling computing devices in a data center with ambient air cooled using heat from the computing devices”).

Digging into some of the back-and-forth around pending applications also gives a glimpse as to why it’s so important for Facebook to acquire patents rather than try to build up the portfolio itself.

It can take years to get a patent approved, and in the case of social media and gaming the process can take even longer, typically up to six to eight years or more from the time the application gets filed. And it’s hard to get patents approved in this area. (One, for example, filed by Facebook for “Facilitating Interaction Among Users of a Social Network,” was originally filed in July 2010, and just last week had a “non-final rejection” of all of its claims. Facebook can still modify and resubmit.)

Meanwhile, the potentials for lawsuits appear to be building up.

“Facebook is really the new kid on the block and they need to gird and prepare themselves with IP because the bigger kids have it,” a patent lawyer explained to me. “They have definitely been very proactive, though. Someone at that company understands that the key to a good defense is a good offense.”

So is 60 the definitive number of patents that Facebook owns today? Not necessarily: this is the number listed by the U.S. Patent Office but the patent lawyer tells us that there could be more that it has simply not registered. “There’s no requirement to record every patent with the USPTO,” he said. “It’s only something you do if and when you want to enforce it.” Although he does point out that it’s generally good practice not to stockpile patents.

For those who may have thought that last week’s patent lawsuit filed by Yahoo against Facebook was a one-off, here are some developments that indicate that we may be seeing more of this to come:

Facebook has now been sued by Mitel, an Ottawa, Canada-based enterprise IT company; and there is emerging evidence of others, including AOL, filing fresh patent applications to cover ever more aspects of social media services.

The Mitel Networks suit, filed on March 16, 2012, in the U.S. District Court in Delaware, alleges infringement of two different patents, one for an “automatic web page generator” and another for “pro-active features for telephony.” They date from 1999 and 2007.

And two patent applications filed last week come from Compass Labs and AOL and respectively cover “user interest analysis and systems” and “content publication activity by a user.”

Mitel says in the suit that Facebook infringed and continues to infringe on its patents. Mitel said that it had originally brought this to light in a letter dated July 2011, and another in September 2011.

“Mitel has suffered and will continue to suffer damage,” the company’s lawyers write. “Mitel is entitled to recover damages adequate to compensate for that infringement in an amount that will be ascertained at trial, but in no event less than a reasonable royalty.”

We have contacted Mitel and the company is not providing much in the way of comment on the suit, neither to us or to The Next Web, which also reported on it, except to confirm the filing. But we have seen that Mitel is not new to this game. Most recently, in March, it settled a case against a company called Klausner Technologies over visual voicemail patents.

Meanwhile, two more patent applications have emerged that also point to potential actions against Facebook and perhaps other social networks.

AOL (owner of TechCrunch), last week assured investors that it had a strategy for its patents. Some of that strategy is getting a bit clearer: on March 15, the company filed a patent application around using messaging to alert users when another user has had some activity on the network. From the patent application:

Collecting and distributing information related to recent content publication activity of an instant messaging (IM) user provides other users in a network with timely, relevant information about people known to the user or within the same social network. A user participating in a social network can quickly and efficiently perceive new information related to other users (referred to as co-users) in a social network by reviewing the co-users’ recent content publication activity. A user may be made able to do so without requiring the co-user to send a communication directly to the user regarding the new facts or new content, and also without requiring the user to actively browse or request information about the co-user.

Interestingly, the filing looks like a revised application, in which some 51 of the original 52 claims have been removed. One patent lawyer told TechCrunch that the AOL filing comes from a line of related cases all filed around 2006; that this application appears to be related to patents already owned by AOL; and that this newest application had gotten the “treatment”:

“It is being honed, specifically, to read on Facebook,” he said. “The claim very clearly has been crafted/tweaked to read on the wall updates that you get when someone posts something new in their status update.  This shows: 1) observation/monitoring of FB features; 2) active efforts to picket fence around these features by AOL.”

He adds that this is another sign of AOL paying attention to Facebook, “which, usually, is a precursor (much like foreshocks) to a larger ‘event’ later on.”

Compass Labs, filer of the second patent application, is also homing in on social media, but it’s less clear that this is directly related to a potential litigation, says the lawyer.

Movie ticket seller Fandango is announcing a partnership with Yahoo today that will see it becoming the online and mobile movie ticketer for Yahoo! Movies, a service which now has over 30 million U.S. users according to comScore. The new collaboration offers Yahoo users access to Fandango’s 20,000 screens across the U.S. and will support purchases online, on mobile and on tablets.

Fandango, which added support for PayPal back in December, says that January and February have been the two best-selling months in the company’s history. Much of that increase in usage is apparently coming from mobile devices. Fandango says that 40% of its visitors come from mobile devices, including both phones and tablets.

The company, which is owned by Comcast, also recently forged ticketing agreements with Regency Theatres and AMC Theatres. Combined, these two deals added 3,000 more screens to Fandango’s total, boosting it up to nearly 20,000 countrywide. They were critical deals to Fandango’s win of the Yahoo partnership, too, which allowed it to beat out rival MovieTickets.com. But those moves did not go unnoticed – in February, MovieTickets, one of AMC’s founding shareholders, joined a lawsuit against the chain of theaters, saying that AMC is in breach of a joint venture agreement that allowed MovieTickets exclusive rights to AMC’s ticket inventory.

“Not content with the percentage of MovieTickets.com it previously negotiated for, AMC has intentionally sought to destroy MovieTickets.com’s present opportunity to maximize its value by achieving competitive dominance in the marketplace,” the suit states. It also alleges that AMC used its insider status to stop a $150 million+ offer from Comcast to acquire MovieTickets, which would have allowed for a merger with Fandango.

The results of the case may also end up impacting the Yahoo deal.

Most of the patents that Yahoo is suing Facebook over are for vague concepts that underly a wide variety of web services, but one is for a much more specific protocol that Facebook definitely employs: seamless communication between email and instant messaging users.

If the other patents are ruled invalid for being too broad to enforce, it’s maybe this Patent 7406501 that could stick. Facebook could need a separate defense or answer to this complaint, or it could be forced into a settlement to close the case prior its IPO.

Filed way back in 2003 before Facebook existed, and issued in July 2008 by the time the social network had roughly 200 million users, the patent’s abstract reads:

“Systems and methods allowing an instant messaging user to exchange messages with an e-mail user. To the instant messaging user, the experience is a seamless exchange of instant messages; to the e-mail user, the experience is a seamless exchange of e-mail messages. Conversion of an instant message to an e-mail message includes insertion of a token into the e-mail message, and conversion of an e-mail message to an instant message includes validating a token extracted from the e-mail message.”

My research hasn’t surfaced any other prominent companies that provide this service. Many will deliver email notifications about missed instant messages, but not actually allow users to have their full emails delivered as instant messages and vice versa.

Over two years after the patent was filed, Facebook launched its unified messaging product that offers this service. Email users can send messages to [username]@facebook.com to have them delivered as Chats or Facebook Messages. Messages or Chats sent back are delivered as emails. That means Facebook is directly infringing on Yahoo’s patent.

Facebook did make some significant improvements to what Yahoo patented. Rather than blindly delivering communications as Chats or emails, Facebook dynamically assesses what the best delivery medium is. If a recipient is actively logged in and “online” to Chat, they’re delivered as Chats. If someone is on the website but logged out of chat, or are completely logged out they’re delivered as Messages. If the recipient is on Facebook’s mobile interfaces they’re delivered through the standalone Messenger product, in-app Messages, or even as SMS.

Yahoo’s move to troll Facebook with its patents was dastardly, opportunistic, desperate, and frankly anti-Internet. It’s also likely a poor business move because it will make make recruitment very difficult, and could send current employees packing to more scrupulous companies. Still, Yahoo might have a valid patent infringement case against Facebook over instant message-email communication because:

• Yahoo’s patent is relatively specific
• The technology is not widely used
• Facebook does appear to infringe upon on the patent
• Instant message-email communication isn’t essential to Facebook or social network, Facebook just wanted to make its product better

The case’s outcome could include some combination of Facebook buying this patent from Yahoo outright, paying exorbitant licensing fees, offsetting it with patents Yahoo infringes on, and shutting down the feature. Facebook should start thinking which it would prefer.

[Image Credit: Shutterstock - JelanaA]