Yahoo, Facebook Kiss And Make Up, Ending Crazy Patent War

Ending one of the more bizarre spats in Silicon Valley lately, Yahoo and Facebook have settled their patent dispute. Yahoo had sued Facebook back in March, alleging the social network infringed on 10 Yahoo patents concerning advertising and social networking itself.

The suit had turned much of Silicon Valley against Yahoo, since the suit seemed so clearly timed to force soon-to-go-public Facebook into coughing up a big cash or stock settlement. But the move backfired, as Facebook then not only spent big bucks to buy its own patent trove, it countersued Yahoo. Not long afterward, Yahoo’s then-CEO Scott Thompson, whom some has said was a driver of the suit, left under a cloud thanks to apparent doctoring of his resume. In early June,negotiations began between the two companies to end the fight.

How dumb an idea was Yahoo’s decision to sue one of the most powerful and influential companies in technology today, one that had been a partner up to then? So dumb that the settlement doesn’t include monetary considerations to Yahoo at all, beyond a vague promise to work together more closely in the future–promises that Yahoo CEO Ross Levinsohn and Facebook COO Sheryl Sandberg failed to shed any more light on in aninterview with AllThingsD’s Kara Swisher. From the release:

Yahoo! and Facebook today announced that they have entered into definitive agreements that launch a new advertising partnership, extend and expand distribution arrangements, and settle all pending patent claims between the companies.

Under the agreements, which include a patent portfolio cross-license, the parties will work together to bring consumers and advertisers premium media experiences promoted and distributed across both Yahoo! and Facebook. Yahoo! and Facebook will also work together to bring Yahoo!’s large media event coverage to Facebook users by collaborating on social integrations on the Yahoo! site. …

 Going forward, Yahoo! and Facebook have agreed to work more closely and collaborate together on multiple tent-pole and anchor events annually over the next several years to provide unparalleled experiences for consumers and world-class sponsorship opportunities for advertisers.

What the deal doesn’t settle, however, is the wretched state of patent law, especially as applied to fast-changing technology industries, that made the short-lived war possible in the first place. Some companies, such as Twitter, are trying to change the game with new policies that limit when they can sue. And the influential appeals court judge who recently tossed out Apple’s patent lawsuit againstGoogle‘s Motorola Mobility unit, Richard Posner, is questioning whether software should be patentable at all.

But notwithstanding the Yahoo-Facebook accord, it seems far more likely that patent wars will worsen before they improve.