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Yahoo calls off patent battle with Facebook

As expected, two Internet giants announce cessation of patent hostilities and agree to a new "partnership."

As expected, Yahoo is dropping its patent lawsuit against Facebook and engaging with the social network in a new partnership.

Yahoo originally filed a lawsuit in March at the U.S. District Court in San Jose, arguing that "Facebook's entire social network model" was based on patented Yahoo technology. Facebook struck back with a countersuit in April over 10 more patents.

The truce comes comes as Yahoo is getting close to naming a permanent replacement for its former CEO, Scott Thompson, whose 4-month tenure at the beleaguered search giant came to an abrupt end after it was revealed he fibbed on his resume.

Yahoo's move to sue Facebook last spring was eventually pinned on Thompson, too, as many Valley insiders saw this as a weak strategic move considering Yahoo already had enough problems to deal with in the wake of shaky earnings and Carol Bartz's forced departure last year.

News of the Yahoo-Facebook negotiations was first reported by Kara Swisher from AllThingsD. Here's the official release:

SUNNYVALE AND MENLO PARK, CALIF. - JULY 6, 2012 - Yahoo! (NASDAQ: YHOO) and Facebook (NASDAQ: FB) today announced that they have entered into definitive agreements that launch a new advertising partnership, extend and expand distribution arrangements, and settle all pending patent claims between the companies.

Under the agreements, which include a patent portfolio cross-license, the parties will work together to bring consumers and advertisers premium media experiences promoted and distributed across both Yahoo! and Facebook. Yahoo! and Facebook will also work together to bring Yahoo!'s large media event coverage to Facebook users by collaborating on social integrations on the Yahoo! site.

"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. We are looking forward to building on the success we have already seen to provide innovative new products and experiences for both consumers and sponsors," said Ross Levinsohn, interim CEO of Yahoo!. "Combining the premium content and reach of Yahoo! as the world's leading digital media company with Facebook provides branded advertisers with unmatched opportunity."

"I'm pleased that we were able to resolve this in a positive manner and look forward to partnering closely with Ross and the leadership at Yahoo!," said Sheryl Sandberg, Chief Operating Officer at Facebook. "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."

Since the launch of the original multi-year partnership between Yahoo! and Facebook that allows users to discover and connect news and information on Yahoo! sites and share them with their Facebook friends, Yahoo! has integrated the feature called "Social Bar" on more than 100 of its properties globally, and more than 90 million users have implemented it. As a result, Yahoo! has the largest active user base among all news sites that have integrated with Facebook's Open Graph platform, making Social Bar the world's leading social news application.

Going forward, Yahoo! and Facebook have agreed to work more closely and collaborate together on multiple tent-pole and anchor events annually over the next several years to provide unparalleled experiences for consumers and world-class sponsorship opportunities for advertisers.