Following the ouster of (now former) CEO Scott Thompson, pundits predictably called upon interim CEO Ross Levinsohn to put an end to the Facebook lawsuit. Unfortunately, the facts likely dictate otherwise. First, Yahoo completely miscalculated Facebook’s willingness and ability to fight. (Seriously, Yahoo? You’ve been sued for patent infringement, what, about 100 times? And you can’t pick up the phone and call a single NPE to find out how Facebook might react to a lawsuit?) Second, Yahoo’s only response to the counter-suit by Facebook (that Yahoo itself infringes 10 Facebook-owned patents) is to conjure up two more patents from the basement and complain that Facebook isn’t playing fair. (Two? Really? Yahoo doesn’t have any more patents in its arsenal?)
This week, Yahoo’s most recent PR disaster exacerbates its earlier PR disaster. Its sudden discovery of a patent portfolio, and subsequent mobilization with no discernible strategy (other than to hire lawyers and scream Faster, Pussycat! Kill! Kill!) led nearly every Silicon Valley media outlet to decry the company’s actions. But now, with the revelations about Thompson’s resume woes (reminiscent of George O’Leary’s 5-day tenure as Notre Dame’s head football coach), Yahoo today is about as vulnerable as ever … the worst possible time to negotiate.
Yahoo negotiating with Facebook today would be like going to the grocery store after a 7-day fast. If someone at Yahoo hasn’t already placed phone calls to Intellectual Ventures, Acacia, IP Navigation, RPX, AST, ICAP and GPC, then the company really had no business trying to monetize its portfolio in the first place. Get advice, buy patents, and generally find out what options you have to regain some leverage, because pouring more money into your legal team will not cut it.
Of course, if Facebook is smart, they have forged relationships with many of these companies already, leaving Yahoo out in the cold. But at least, in that scenario, getting on the phone at least gives Yahoo an idea of how screwed they really are, in which case they likely settle before things gets any worse!