Yahoo! sued Xfire in February, alleging that Xfire had infringed on Yahoo!'s patent number 6,699,125, which covers "a game and messenger client-server system", allowing gamers to chat easily with each other on-line.
Yahoo! also alleged that Xfire had begun to develop a similar system after Chris Kirmse, one of the co-inventor's of Yahoo!'s system, started work for Xfire, according to reports.
Yesterday Xfire formally responded to the allegations, filing an answer in a San Francisco federal court that refuted the claims.
Xfire also filed a countersuit, accusing Yahoo! of using a lawsuit as an attempt to drive Xfire out of business (and therefore avoid direct competition in the marketplace) or to force Xfire to sell or license its proprietary technology to Yahoo! for far less than fair market value to settle the expensive litigation.
In particular the countersuit claims that Yahoo! chose to issue the patent suit without first sending the usual "cease and desist letter," meaning that Xfire first learned of the complaint the evening before it was filed.
Xfire also claims that it has made good faith attempts to address the search engine's concerns, including an offer to allow Yahoo!'s co-founders to review Xfire's code or to mediate the dispute by turning the disputed code over to a neutral third party.
"We are very disappointed that Yahoo! has refused all of our offers to immediately demonstrate we don't infringe," said Mike Cassidy, CEO of Xfire. "The facts of the case will prove we have not infringed."
The countersuit seeks a dismissal of Yahoo!'s complaint, an order enjoining Yahoo!'s unfair business practices, and damages resulting from Yahoo!'s unfair business practices.
The search engine has yet to comment on the filing.