Facebook launched a new and improved version of the company Facebook Stories section on Thursday. Facebook

Facebook and Yahoo have settled their patent suits and entered into an agreement to form a new internet advertisement and licensing partnership.

With the new partnership, both have ended patent infringement law suits which began at the time of Yahoo's ousted chief executive Scott Thompson.

"I'm pleased that we were able to resolve this in a positive manner and look forward to partnering closely with Ross and the leadership at Yahoo," said Sheryl Sandberg, Facebook's chief operating officer in a statement.

The new deal allows cross-licensing of patents and collaboration in advertisement offerings. It also allows Facebook users to share Yahoo content.

"Combining the premium content and reach of Yahoo! as the world's leading digital media company with Facebook provides branded advertisers with unmatched opportunity," said Ross Levinsohn, interim CEO of Yahoo.

"We are excited to develop a deeper partnership with Facebook, and I'm grateful to Sheryl and her team for working hard together with our team to develop this dynamic agreement," he added.

Yahoo sued Facebook in March, a month before the company went public accusing it of violating 10 patents including a number of online advertising technology.

Yahoo even claimed that Facebook was the worst performing company before adopting its technology ideas.

The move was criticised as an alleged attempt to extract money from a company which was about to go public.

Facebook in its counter suit accused Yahoo of being short-sighted for choosing litigation over innovation.

Following the lawsuit by Yahoo, Facebook bought nearly 750 patents from IBM and paid Microsoft $500mn (£355m) for hundreds of other patents.

The patent settlement and the deal were seen as the result of the initiative by Yahoo's interim CEO Levinsohn who is the front-runner for the top post in the company.