Facebook’s defense strategy against Yahoo is taking shape

Facebook apparently has chosen to fight Yahoo (see here for the back story) rather than settle.  In a second major patent purchase, adding to the 750 patents purchased from IBM, Facebook has acquired 650 patents from Microsoft for $550M. The 650 patents were part of Microsoft’s recent 925-patent purchase from AOL. (A license to the remaining patents was also part of the deal.)

Since Yahoo filed its infringement suit, Facebook has increased its portfolio of cross-license-potential patents from just over 50 to 1,400, with the additional bargaining power of promising not to counter sue Yahoo over infringement of those 275 licensed patents. Technology companies looking at IPOs should take an early look at the strength of their patents, anticipating similar challenges once extra funding is available to the company. Waiting to acquire a defensive portfolio when you have to can be much more expensive than developing it over time.