14 DAY TRIAL // It has been revealed that Facebook has acquired 18 key patents and patent applications on social networking owned by Friendster, the pioneering social network. Friendster had been acquired by MOL Global, a Malaysian company. Facebook is said to have paid $40 million for the patents but the deal also involves a partnership for sale of virtual goods and currency with MOL, which was revealed earlier.
Friendster was the first social network to gain any recognition, but its success was short-lived and it was quickly overtaken by rivals, initially MySpace and later on Facebook. However, it managed to get its hands on several, rather wide-reaching patents related to social networking. Several patents are still being reviewed by the US Patent and Trademark Office. As Friendster’s influence dwindled, it was believed that the patents it held became more valuable than the company. Friendster itself touted those patents as valuable assets.
The social network was acquired by MOL late last year, for a rumored $39.5 million. Friendster still enjoyed a solid audience in some Asian markets, though Facebook is rapidly catching up there as well. MOL is an online payments company which operates in the Asian region. The acquisition made sense for the company as it enabled it to integrate its payments system with the still popular social network.
About a month ago, Facebook and MOL announced a partnership which would allow users to buy Facebook Credits, the social network’s touted virtual currency, through MOL’s online and offline distribution network. However, it is now said that the deal also included the Friendster patents. Facebook is said to have paid $40 million for the entire deal, which would mean that MOL has already recovered its initial investment in Friendster.
For Facebook, the patents are a strategic asset. At its size, it can’t afford to be threatened with litigation. Since the patents are incredibly broad, it was a real danger for the social network. It’s likely that Facebook sees them as just protection against lawsuits, but the possibility of using them against competitors can’t be excluded.