By Bill Klump | @TheKlumper | February 1st, 2012
Facebook is widely believed to be readying its first initial-public-offering papers this week, with its prospective IPO looming as one of the biggest market debuts in history. The documents to be filed with the U.S. Securities and Exchange Commission will provide investors with their first significant glimpse into the social-networking giant’s business performance, as well as at such other matters as its spending, hiring and executive pay. The Wall Street Journal reported over the weekend that the company was selecting its bankers and could make the filing as early as Wednesday.
Busy with preparations for one of the biggest IPOs ever, Facebook has to deal with several lawsuits accusing it of patent infringement.
In the same way that Apple has sued Samsung and Microsoft has forced several companies to pay it fees for the use of the Android operating system, dozens of companies seek part of the estimated $10 billion that the Facebook IPO will raise.
The fact that Facebook was named as a defendant in twice as many patent infringement lawsuits in 2011 as the year before shows that it is not immune from the wave of patent litigation that tech companies have experienced in the past two years.
As reported yesterday by Kasey Joyce of KSDK in St. Louis, another federal lawsuit filed by two Metro East moms has also become a thorny issue for Facebook. Turns out the moms don’t want their children used in ads on Facebook. Those ads are generated when a user “checks in” or presses like.
“Say you saw your daughter in a billboard and it said I like these jeans,” Katz explained. “Most parents would be really upset about that. That’s exactly what’s happening on Facebook, but on a much bigger scale.”
The lawsuit alleges that by law, minors enter into a contract, so they can’t agree to be a part of advertisements like that, even if they sign the terms and conditions for Facebook.
Under California law, every time Facebook violates that by posting an advertisement or a check in with a minor, they can be charged a $750 penalty. Multiply that times Facebook’s estimated 14 million minor users in America, and it can really add up.
“The way the lawsuit is filed and structured it is in the tens of billions,” Katz said.
That would be a potentially huge liability for anyone considering buying Facebook’s stock.
As for Facebook, they opted not to comment on the suit or the pending initial public offering.
Facebook’s legal team has filed two motions in the case: one to get it dismissed, and another to get the case transferred to California. Both requests are still pending.
