Is Yahoo! Out of Line?

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Once upon a time, there was an understanding that Internet companies tended not to sue each other over dubious patent portfolios. Well, Yahoo! (NAS: YHOO) must not have attended that cyberspace meeting, as it has just filed suit against soon-to-be-public social kingpin Facebook.

The purple search engine alleges that Facebook is infringing on 10 different patents that cover a wide range of topics, including social music, privacy settings, instant messages, user-tailored ads, and other ubiquitous features.

The timing is a key strategic aspect of the suit, as companies that are gearing up for an IPO have fewer resources to focus on drawn-out litigation and patent disputes. Yahoo! notably pulled this same trick before with Google (NAS: GOOG) just before Big G went public in 2004. Yahoo! was able to wrangle out some Google shares as payment as part of the licensing settlement, which cost Google about $201 million in noncash charges.

Facebook's a bit boggled by the suit, too, with a spokesman saying that the company is disappointed that a "longtime business partner" -- one that has "substantially benefited from its association with Facebook" -- is taking it to court, adding that it will defend itself "against these puzzling actions."

Just look at how Eastman Kodak (OTC: EKDKQ) devolved to little more than a patent troll after failing to adapt to the digital times as its film business crumbled. That didn't work out too well as an actual business model, and look at the fallen icon now.

Yahoo! is a far cry from seeing that gloomy Kodak moment, but resorting to patent assaults is a sign that its business ain't what it used to be.

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At the time this article was published Fool contributorEvan Niuholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Yahoo! and Google.Motley Fool newsletter serviceshave recommended buying shares of Google and Yahoo!. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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