Will Facebook and Yahoo Re-Friend?

Yahoo (NASDAQ:YHOO) and Facebook (NASDAQ:FB) may be close to ending their patent infringement battle, with a deal reportedly close to being finalized. Among issues currently said to be under discussion are cross-licensing of patents and a deeper integration of Facebook into Yahoo and vice versa.

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Yahoo interim chief executive Ross Levinsohn and several board members, including Third Point’s Daniel Loeb, are said to be in talks with the newly public social network’s chief operating officer, Sheryl Sandberg, and its vice president of partnerships, Dan Rose. A settlement would make sense for Facebook, which is hoping for some positive press to drive up its sagging stock.

However, with Facebook having recently paid Microsoft (NASDAQ:MSFT) $550 million to buy and license key patents that were originally AOL’s (NYSE:AOL), the social network may not be willing to shell out a similarly large amount to Yahoo.

Last year, the two had entered into a partnership such that articles that people read on Yahoo News appeared on their Facebook friends’ news feed. Since the integration, Yahoo News is said to have seen its daily traffic more than triple.

However, the two first started bickering when Yahoo filed a patent infringement lawsuit against Facebook in March, accusing the social network of wrongly using several of its technologies, including placing of advertisements on web pages and customizing views for social users. Facebook responded with a countersuit next month that defended its own patents and claimed that Yahoo was in fact infringing on 10 of its patents.

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