Google settles dispute with Yahoo

Internet search-engine giant Google has agreed to give its closest rival Yahoo 2.7 million shares of its stock to settle patent infringement and other legal claims, the companies announced on Tuesday.

In a filing at the US Securities and Exchange Commission, Google said it expects to record a charge of between $260 million and $290 million as a result of the settlement, leading to a net loss for the third quarter ending September 30.

Google said it will realize an income tax benefit in that quarter of $100-115 million related to this non-cash charge, CNET News reported.

As part of the deal, Google has agreed to license several patents from Yahoo subsidiary Overture Services, ending a two-year court battle that threatened Google's primary source of revenue: advertising, the online service reported.

Overture, a pioneer in commercial search, holds intellectual property rights to pay-per-click and bidding systems that grant websites higher placement in search results--both fundamental to Google's ad network.

The two companies also ended a dispute over Yahoo's right to buy shares in Google, which is preparing for an initial public offering.

Yahoo held warrants to purchase 3.7 million shares of Google under an agreement struck in 2000. Google issued 1.2 million shares to Yahoo in June 2003 pursuant to a conversion provision in the deal, but Yahoo contended it held rights to more.

To resolve the two matters, Google agreed to issue 2.7 million shares of Class A common stock to Yahoo. In turn, Yahoo dropped its lawsuit against Google and issued a 'fully paid, perpetual license' to Overture patents, according to SEC documents.

"In connection with the settlement of the warrant dispute, the patent lawsuit, and in payment for the license, Google issued shares of its Class A common stock to Yahoo," the companies said in a statement.