Last week, Yahoo threatened Facebook with legal action over the search engine company's ad, website and messaging patents. Business Insider now claimed that talks between the two companies to resolve the issue have broken down. Sources have reportedly told the news source that Yahoo now will take "formal action" against Facebook, most likely in the form of a lawsuit.
Facebook has not responded to this most recent rumor. Yahoo has responded with the same statement that it made when news of the conflict first broke, that unless Facebook entered into a licensing agreement with the company, Yahoo would be 'forced' to take action to protect its interests.
Yahoo has been struggling as the Internet has evolved. Last year, the search engine's revenues dropped by over 20 percent since 2010. In January, former PayPal president Scott Thompson signed on as CEO. This was quickly followed by the resignation of the company's co-founder Jerry Yang from its board. In early February, three additional long-term board members resigned. Also in February, acquisition discussions with potential Asian buyers, including Alibaba, in which Yahoo has an interest, and SoftBank, fell through. Earlier this week, it was reported that the company was planning a major layoff involving several thousand employees.
If Yahoo does sue Facebook, it will be taking action against one of its strategic partners. In September, the two struck a deal through which Yahoo News was integrated into Facebook so that people using the social networking service could see what Yahoo articles were being viewed by their friends.
If Yahoo is successful in its lawsuit, one insider suggested that the company may be looking for a piece of Facebook's future revenues as compensation. It is also possible that Yahoo may be trying to get Facebook to pay it off and have the matter settled before Facebook's much anticipated upcoming IPO.