In dropping the lawsuits, the companies agreed Friday to license their patents to each other. They are also agreeing to an advertising alliance that expands their existing partnership.
Friday’s settlement involves no exchange of money and comes after a months-long squabble between the two Internet icons.
The truce ends a conflict provoked by Yahoo’s short-lived CEO, Scott Thompson, who was dumped from the job two months ago after misinformation on his official biography raised questions about his integrity.
Under Thompson, Yahoo filed the patent lawsuit in March, wielding it as a weapon against a company that Thompson believed had been prospering from the ideas of its older rival. The complaint alleged that Facebook infringed on 10 Yahoo patents covering Internet advertising, privacy controls and social networks.
But Thompson’s attack on Facebook Inc. quickly turned into a public-relations disaster. Much of the technology industry railed against Yahoo’s tactics. Critics viewed the lawsuit as a financial shakedown by a desperate company whose well of innovation had run dry.
Yahoo is trying to snap out of a long-running financial funk brought up by Facebook’s success and Google Inc.’s dominance of Internet search and advertising.