Facebook’s New S-1: An ‘Unfavorable Outcome’ In The Yahoo Patent Lawsuit ‘Could Be Material To Our Business’

Facebook just filed a new S-1 with the Securities and Exchange Commission. We’ve sifted through what’s new and one noticeable change is the inclusion of commentary about Yahoo’s patent suit against Facebook as a risk factor.

From the filing: “From time to time, we receive notice letters from patent holders alleging that certain of our products and services infringe their patent rights. Some of these have resulted in litigation against us. For example, on March 12, 2012, Yahoo filed a lawsuit against us in the U.S. District Court for the Northern District of California that alleges that a number of our products infringe the claims of ten of Yahoo’s patents that Yahoo claims relate to “advertising,” “social networking,” “privacy,” “customization,” and “messaging.” Yahoo is seeking unspecified damages, a damage multiplier for alleged willful infringement, and an injunction.”

As we heard a few weeks ago, Yahoo is suing Facebook over alleged infringement of ten “method” patents by the social network. You can read more details about the patents in question here.

Facebook says it has not yet filed an answer or any counter claims to Yahoo’s complaint, but does “intend to vigorously defend this lawsuit.” Also, Facebook states: This litigation is still in its early stages and the final outcome, including our liability, if any, with respect to these claims, is uncertain. If an unfavorable outcome were to occur in this litigation, the impact could be material to our business, financial condition, or results of operations.

In the previous S-1 filing from early March, Facebook acknowledged that Yahoo sent a letter alleging that the social network was infringing on their patents. At the time, Yahoo had not yet filed the lawsuit. Now that legal action has been taken, Facebook is recognizing this in the filing. The takeaway here is that Facebook is recognizing that the Yahoo suit is a risk factor for the company and could have a negative impact on its business. Last week, Facebook announced it would be buying 750 patents from IBM to shore up against potential legal attacks from patent trolls.

In relation to another legal matter, Facebook also added its intentions to dismiss Paul Ceglia’s lawsuit. From the filing: On March 26, 2012, we filed a motion to dismiss Mr. Ceglia’s complaint and a motion for judgment on the pleadings. We continue to believe that Mr. Ceglia is attempting to perpetrate a fraud on the court and we intend to continue to defend the case vigorously.