The company will likely get the billions of dollars it needs to make its numerous investors and employees very rich. But if they want the money, they have to go through what may be a new pre-IPO hazing ritual. While there are no cool robes, there are paddles — but the paddles are made of patents instead of wood.
Once again, the hazer is Yahoo, a burnt-out relic of Internets past that wants a piece of the action. Since Yahoo is widely considered to have not done anything particularly noteworthy in years, it should come as no surprise that the company would use its patent portfolio as leverage to gain some profits off of a company that is actually able to innovate.
Here’s why this may be the start of a hazing ritual: this is the second time around for Yahoo when it comes to pre-IPO litigation. The first time was in 2004, when a trendy search engine called “Google” found itself in Yahoo’s legal crosshairs. That time, they got a nice chunk of pre-IPO Google stock. This time, Yahoo wants a piece of the upstart that is all the rage with nearly every human being on earth with access to broadband.
Now, software patents are a complex issue, the details of which I won’t get into here. While I think a lot of patents make a lot of sense, I also think that a majority of patents are just created for lawyers whose sole capability is the crippling of others — kind of like film critics or Internet columnists.
Hands down, the best patent cited in the list of 10 Yahoo claims Facebook is infringing upon is for a Dynamic Page Generator (US Patent #5983227). This patent would essentially block all but the simplest Web sites created since the mid 90s.
I imagine Facebook will simply do what Google did a few years ago: quietly pay-off the mean paddle-wielding senior for a pass into the fraternity of publicly traded Web giants, since the pay-off is pocket change compared to the entire estimated $10 billion IPO — a sum closer to the GDP of a small country. The payoff probably won’t be more than the price of a private jet or yacht for some freshly minted kajillionaire.
On the one hand, it’s hard for me to feel bad for Facebook. In the matter of a few years, the company has contributed to the shutdown of a number of Web sites, some of which had thriving businesses and communities. These sites’ traffic and advertising dollars have shifted, increasingly gobbled up as a billion eyeballs locked on to the hypnotic blue of the social behemoth. But, on the other hand, Facebook went about this work fair and square by providing people with something they wanted.
Now, I wonder if Google is watching Yahoo and getting a little jealous. After all, Google bought Motorola’s patent portfolio this past August. Maybe they are getting ready to go after the mega-IPOs in mobile we’re all but guaranteed to see a few years down the road. I imagine it’s far more fun being the corporation holding the patent paddle.
Full disclosure: The Washington Post Co.’s chairman and chief executive, Donald E. Graham, is a member of Facebook’s board of directors.