Google and Yahoo! settle patent dispute

Posted on 10 Aug 2004 at 09:27

Google has settled a patent dispute with Yahoo! which threatened to damage the company's forthcoming IPO. In return for a licence to a disputed Overture patent, Google will give ]Yahoo 2.7 million Class A shares - about 1 per cent of its stock. On current estimations the shares are worth around $360 million.

The dispute goes back to 2002 when the pay-per-placement company Overture, now owned by Yahoo!, sued Google. At the centre of the dispute was Google's AdWords bidding process whereby the advertiser who offers most gets their ad seen against a particular search term. Overture said that it had already claimed the technique under U.S. Patent No. 6,269,361 and several related patents. Google has now a licence to use that patent.

In settling the case, Google has removed one more obstacle on the path to its IPO. Big investors would have been wary that such a cornerstone of the Google business model was based on a disputed patent. If a court case went badly wrong the whole company could have been derailed.

Author: Steve Malone

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