Facebook and Yahoo end patent battle with advertising partnership deal

Yahoo and Facebook have ended their four-month patent battle and formed an advertising partnership.

In March, Yahoo sued Facebook for infringing 10 patents ahead of the social network's planned public listing.

The following month, Facebook counter-sued, claiming Yahoo had violated its patents covering photo tagging, advertising and online recommendations.

The former warring firms have now announced they will cross-license innovations from each other and collaborate on future projects.

Yahoo's interim chief executive Ross Levinsohn initiated moves to resolve the dispute immediately after taking over the role, reported the AllThingsD blog ahead of the official announcement.

In the resulting negotiations, Facebook's team was led by the social networking firm's chief operating officer Sheryl Sandberg.

In a statement, Ross Levinsohn said: "We are excited to develop a deeper partnership with Facebook, and I'm grateful to Sheryl and her team for working hard together with our team to develop this dynamic agreement. Combining the premium content and reach of Yahoo as the world's leading digital media company with Facebook provides branded advertisers with unmatched opportunity."

Sheryl Sandberg said: "Yahoo's new leaders are driven by a renewed focus on innovation and providing great products to users. 

"Together, we can provide users with engaging social experiences while creating value for marketers."

The move may help secure Yahoo's top job for Levinsohn, according to the BBC. Rival Jason Kilar, head of the Hulu video streaming service, withdrew after news of the patent agreement leaked.

Levinsohn took over the chief executive role in May after then Yahoo CEO Scott Thompson resigned under pressure from investors, after inaccuracies were discovered in his corporate biography.

Thompson's departure came just four months after taking over as chief executive from Tim Morse, who had held the role on an interim basis after Yahoo's board removed Carol Bartz as chief executive in September 2011 after only two and a half years.

Yahoo has been in a state of nearly constant turmoil since it rejected Microsoft's $44bn takeover offer in 2008. It is looking to re-establish itself as a leader in digital advertising in the face of strong competition from newcomers Facebook and Twitter.

Levinsohn, who is now spearheading that effort, is "a seasoned media veteran with deep ties to the major entertainment companies and to advertisers, and has articulated a vision for Yahoo as a digital media company," according to Bloomberg Businessweek.