Facebook warns of possible ‘unfavorable outcome’ in Yahoo lawsuit

Facebook warned investors that an “unfavorable outcome” in a patent dispute with Yahoo could have a material impact on its business.

The social networking giant noted the risk in a filing Tuesday with the U.S. Securities and Exchange Commission.

Yahoo sued Facebook in federal court two weeks ago, alleging that Facebook was infringing on its patents related to advertising, social networking, privacy, customization and messaging.

“Yahoo is seeking unspecified damages, a damage multiplier for alleged willful infringement, and an injunction. We have not yet filed an answer or asserted any counterclaims with respect to this complaint. We intend to vigorously defend this lawsuit,” Facebook said in the filing. “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.”

Facebook recently bought 750 software and networking technology patents from IBM to defend itself as it prepares for an initial public stock offering that could give the company a value of $100 billion or more. In an SEC filing, Facebook said it had applied for 503 patents in the U.S. and had been issued 56.

Facebook and other companies have seen an escalation in patent lawsuits in the run-up to IPOs.

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