Facebook Picked Up Friendster's Patents For More Than It Cost To Buy Friendster

from the patent-valuation dept

A few years back, there was quite an uproar over the discovery that Friendster had received a patent on the basic concepts of "social networks." The company, which was already becoming an also-ran in the social networking space made a lot of noise about enforcing the patents against competitors, but not much came of it. However, the company did keep collecting patents. We were actually wondering about those patents a couple months ago when Amazon popped up with a patent on some basic social networking concepts. Turns out that just a month earlier Facebook had quietly bought Friendster's 7 patents and 11 patent applications for an astounding $40 million. Of course, it wasn't $40 million entirely in cash, but a mixture of cash, advertising and "payments for virtual goods" (don't ask).

What's impressive here is that the entire company Friendster had been sold just a few months earlier for... $39.5 million. So the buyer has effectively recouped the purchase price in less than a year. Impressive. As for why Facebook just wasted so much money (even if not all of it is "real") on a bunch of patents? As Liz Gannes postulates, it's probably just to keep the patents from getting in the way of an upcoming IPO. For a company currently valued at such insane levels, $40 million to clear an obstacle to an IPO is nothing major -- especially when a portion of the deal is via in-kind services. Hopefully Facebook knows better than to start using the patents offensively, but somehow, I get the feeling this is not the last we'll hear about these patents.

Reader Comments (rss)

(Flattened / Threaded)

  1. identicon
    Schickle, Aug 6th, 2010 @ 3:37am

    just wait till someone patents the wheel outside of Australia

    reply to this | link to this | view in thread ]

  2. identicon
    abc gum, Aug 6th, 2010 @ 5:05am

    It's good to see that our market is efficient and does not waste money on frivolous activity.

    reply to this | link to this | view in thread ]

  3. identicon
    Anonymous Coward, Aug 6th, 2010 @ 6:31am

    Sometimes I think these guys are in collusion with each other to milk the shareholders. Really Friendster had patents? For what? Stupidity?

    reply to this | link to this | view in thread ]

  4. icon
    Overcast (profile), Aug 6th, 2010 @ 6:33am

    Can't see the forest for the trees..

    Sums it up pretty much - what a 'winning' decision, lol

    reply to this | link to this | view in thread ]

  5. identicon
    Harry, Aug 6th, 2010 @ 7:03am

    Of course, Friendster's value dropped once they sold the patents. If they still had the patents, it's safe to assume they would have sold for more than $39.5M, especially if Facebook was posturing from an upcoming IPO.

    reply to this | link to this | view in thread ]

  6. identicon
    Anonymous Coward, Aug 6th, 2010 @ 7:25am

    For those defending these patents, I find the claim that Facebook looked at these patents and deciding that it wants to implement some new technology as a result of looking at these patents to be highly dubious at best.

    These patents weren't required for anyone to think of and implement any technology they cover and so they do little to promote the progress of anything but wasted money that could be better spent on invention and innovation instead.

    People should participate in

    which allows people to submit prior art examples for patent applications in hopes that the USPTO will see them.

    reply to this | link to this | view in thread ]

  7. icon
    Shawn (profile), Aug 6th, 2010 @ 8:10am

    Did you know that shining a laser pointer on the floor so your cat will chase it is patented? http://www.google.com/patents?vid=USPAT5443036

    A method for inducing cats to exercise consists of directing a beam of invisible light produced by a hand-held laser apparatus onto the floor or wall or other opaque surface in the vicinity of the cat, then moving the laser so as to cause the bright pattern of light to move in an irregular way...

    Completely unrelated but I just learned read it and posted into the first patent related post on techdirt I could find

    reply to this | link to this | view in thread ]

  8. identicon
    Anonymous Coward, Aug 6th, 2010 @ 8:49am

    This is why startups like patents

    Without those patents Friendster had no value.

    reply to this | link to this | view in thread ]

  9. identicon
    nichole, Aug 9th, 2010 @ 5:39am


    reply to this | link to this | view in thread ]

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