Through Strategic Deal with Friendster’s New Owner, Facebook Expands Patent Portfolio

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By Eric Eldon Comment

If extremely broad social networking patents prove enforceable in court one day, then Facebook recently removed a big threat — and is now in possession of it. The company recently acquired 18 patents and patent applications from MOL, the Malaysia-based new owner of Friendster, as VentureBeat and GigaOm reported today, with a source telling the latter publication that the deal was part of a larger package worth $40 million.

Friendster was the first social network of the past decade to make it big, following earlier efforts like Six Degrees. But the company struggled in the US due to technical and management issues, and eventually got passed by MySpace, then Facebook. But it was still was able to gain strong followings in parts of southeast Asia — at least until Facebook began growing in the region over the past couple years.

Kleiner Perkins encouraged Friendster to begin the patenting process, back in 2003, leading to the company obtaining ones like “feeding updates to landing pages of users of an online social network from external sources.” In later years, struggles with traffic helped the company remember the intellectual property it had, and has not ruled out going on the offensive against other social networks.

Facebook, meanwhile, has been buffeted by court cases brought on by smaller companies looking to cash in on its success. One, for example, was from web conferencing company Leader Technologies (whose slogan is “The Intellectual Capital Company”). It claimed Facebook was infringing on a patent it received in 2002 relating to “a method and system for the management and storage of electronic information.” In the tech industry, the shorthand description for companies like Leader is “patent troll.”

Which brings us to why Facebook would want Friendster’s patents. In the past, some have assumed that Facebook’s own patenting efforts could be part of a plan to go on the offensive against any potential social networking threat. Facebook itself has never said that its portfolio is purely defensive, and certainly, other leading tech companies have used their IP and legal muscle to smash smaller rivals.

But Facebook has yet to take this approach with the many patents it already has, or hopes to gain, even when it has felt threatened by rivals like Twitter. And there is also the issue of how well very broad social networking patents might be enforced by the courts. We believe that its purchase of the patents was intended to preclude any trollish court cases — or to reduce outsiders’ perception that it might be vulnerable to them, as it considers when to go public.

And that’s not all. The deal with MOL came with some other benefits, according to GigaOm, including advertising, cash, and the introduction of MOL’s payment service as a way of obtaining Credits, Facebook’s rapidly expanding virtual currency. In other words, MOL was able to approximately cover the cost of its purchase while gaining a powerful new partner; Facebook precluded a potential legal threat while getting a new way to monetize one of its fastest-growing markets.