Executives at Yahoo and Facebook have completed an extensive strategic deal, as part of a final settlement of their contentious patent infringement lawsuit and countersuit.
According to sources close to the situation, the agreement will include a major expansion of their ongoing partnership, including a joint advertising sales effort, as well as cross-licensing of some key patents between the pair.
The deal has gotten approval from the companies’ boards — in fact, Yahoo’s directors agreed to it this morning in a telephonic meeting. It will be announced sometime later today.
No actual cash payment will change hands under terms of the deal over the patents, in contrast to the $550 million that Facebook paid Microsoft recently in another transaction related to AOL patents.
But sources said Facebook and Yahoo hope there will be significant upside in several possible advertising and other business deals between the pair that could yield large revenues if executed well.
In addition, there is a possibility that Facebook could later pay to license other Yahoo patents not included in this deal.
Discussions to settle the lawsuits — negotiated by Yahoo interim CEO Ross Levinsohn and Facebook COO Sheryl Sandberg, among others — began almost as soon as Yahoo’s board ousted former CEO Scott Thompson, which I reported on in early June and Yahoo officially confirmed several weeks later in a regulatory filing.
The lawsuit was initially waged by Thompson, who reportedly promised directors that a big financial payoff of many billions of dollars could result from the patent lawsuits against Facebook.
At the time, despite strong support by its legal execs, many other Yahoo managers — including those who had crafted an earlier and successful content- and data-sharing agreement with Facebook — were blindsided by the aggressive move by Thompson. That included Levinsohn — who was then in charge of its global media unit — and other top execs.
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