MILAN/FRANKFURT (Reuters) - Facebook Inc has suspended its location-sharing feature in Italy after a Milan court ruled last year that the social networking giant had violated competition and copyright laws by effectively copying a similar app from a local start-up.
Italian software developer Business Competence filed a lawsuit in 2013, accusing Facebook's Nearby feature of having copied its Faround application, which helps users locate Facebook friends in the vicinity.
A copy of the court's ruling, issued on Aug. 1 last year but only made public by Business Competence on Monday, said that Facebook launched its Nearby feature only months after Faround was included in the social network's app store in 2012.
The complaint alleged that the two applications were "extremely similar" in their functions and general set-up.
Facebook said it has discontinued offering what it now calls Nearby Places in Italy while it appeals against the court's ruling. Facebook dropped what it called Places in 2011 but later revived similar features in Nearby, which also competes with products offered by Silicon Valley rivals Foursquare and Yelp.
The court ordered Facebook to suspend Nearby Places in Italy or pay fines of 5,000 euros per day for copyright infringement and unfair competition. It said that Facebook may have to pay further damages to be determined at a later stage.
The ruling is preliminary and a further hearing is scheduled for April 4.
Facebook sought to have the order put on hold while it awaited a ruling on the merits of the case, but its request was rejected by the court in December. It said on Monday that it is complying with the decision pending its appeal.
"We respectfully disagree with the decision. The claims were without merit," a Facebook spokeswoman told Reuters in an emailed statement.
"We believe the order was wrongly decided, but we have respectfully complied with the order in the interim."
Business Competence's Faround app was launched in September 2012 and quickly gained popularity among Italian users.
Faround was the most downloaded new social networking app in the country during the week of Nov. 22, 2012, according to data from App Annie, a business that measures online traffic.
Downloads plunged the month after Facebook launched its own Nearby feature on Dec. 17 of that year.
"It was a big blow to us to see that we were losing everything we had invested (into Faround)," Business Competence Chief Executive Sara Colnago told Reuters, adding that it had cost the company 500,000 euros ($530,050) to develop the app.
(Reporting by Giulia Segreti and Manuela D’Alessandro in Milan and Eric Auchard in Frankfurt; Editing by David Goodman)