Yahoo, Facebook settle patent fight, deepen partnership

Yahoo and Facebook have put down their arms and are settling a bitter legal fight over patents, preempting a nasty court battle between two Silicon Valley giants who used to be on much friendlier terms.

The truce calls for a deeper advertising partnership between the companies and cross-licensing of patents, but no money will change hands, according to All Things D which was first to report the news.

Charging a violation of patents, Yahoo, at the direction of since-ousted Chief Executive Scott Thompson, sued Facebook, one of its biggest rivals for advertising dollars, in March, two months before the social networking company’s stock market debut. Facebook counter-sued.

The legal strategy, part of Thompson’s multi-pronged effort to drum up cash and turn around Yahoo, had precedent. Yahoo in 2003 bought search advertising company Overture, which had sued Google over patents. Yahoo settled the lawsuit the following year for 2.7 million shares of Google before the search giant went public.

Thompson abruptly resigned in May amid a brouhaha over false academic credentials on his corporate resume. His successor, Ross Levinsohn, Yahoo’s interim CEO and a contender for the permanent position, reached out to Facebook Chief Operating Officer Sheryl Sandberg to negotiate a detente, according to All Things D.

Neither company is commenting on the news in advance of an announcement expected after the financial markets close Friday.

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