Xerox research subsidiary, the Palo Alto Research Center (PARC), has struck a licensing deal with search-engine startup, Powerset.

Powerset is developing a search engine based on natural language processing with the help of PARC, which has been working on technology in this area for 30 years, said Powerset founder and CEO Barney Pell. The search engine is expected to go live by the end of the year.

Powerset, which has raised $12.5 million in funding from various venture capital firms and angel investors, has been negotiating with PARC to use the technology the research firm developed since September 2005, a mere month after Powerset was launched and a month before the company was incorporated in October, Pell said.

The company even managed to win over top talent from PARC to join its team. Ron Kaplan, who led the PARC team that developed the natural-language-processing technology Powerset is licensing, is joining the company as its chief technology and scientific officer.

In addition to the licences, Powerset also holds the patents to the technology, Pell said. In return, PARC receives equity in Powerset and royalties on company revenue. Powerset is also funding the natural language processing research team's efforts at PARC.

Pell described the difference between how a search engine powered by natural-language-processing technology and search engines available from Google, Yahoo and others that depend on keywords work. He said the way many of the top search engines today index web content is in keywords, but they don't have any idea what those words mean or how they relate to each other.

A search engine based on natural language, however, can accept queries written as people normally speak – such as, "What company did IBM acquire in 1996?" Pell said. The results of the search should directly answer that question without giving a user every reference to the words "acquire," "IBM" and "1996" that have been indexed.

It's true the major search engines such as Google do question-and-answer type searches today, Pell said, but they are still mainly based on keywords.

Of course, researchers have been working for three decades to come up with successful natural-language-processing technology, and it has been no easy task, something that Pell himself acknowledges.

"Enabling computers to extract meaning and relationships in text is an incredibly hard problem," he said.

That said, to assume Powerset's search engine will work without a hitch is not necessarily a safe bet. However, Pell said there have been recent breakthroughs at PARC in this area, and the software that Powerset has licensed should provide some of the highest-quality natural language processing-based search available.

Powerset is not the only company attempting to perfect natural language processing-based web search. Hakia is also developing a search engine based on natural language processing.