Google and Yahoo have resolved one of two disputes the search giants announced on Monday.

Google will license technology patented by Yahoo subsidiary Overture Services. The license will cover US Patent 6,269,361, entitled "System and method for influencing a position on a search result list generated by a computer network search engine," and related patents, according to a statement by the companies. Yahoo will dismiss its patent lawsuit against Google on the matter. Overture was acquired by Yahoo last year. It sued Google in April 2002.

The companies also resolved a dispute over a stock warrant connected to a services agreement in 2000. Google issued about 1.2 million shares to Yahoo in June 2003, but Yahoo had said it was entitled to more shares, according to a Google filing to the US Securities and Exchange Commission (SEC) on Monday.

Clear legal decks for IPO

The settlement is good news for Google, which should be looking to resolve any lingering legal issues before its proposed initial public offering (IPO), analysts said. For Yahoo, it could strengthen the company's hand if it pursues patent infringement claims against other companies.

As part of the settlement of the warrant dispute and patent suit and in payment for the license, Google issued 2.7 million shares of its Class A stock to Yahoo.

Overture has granted Google a fully paid, perpetual license to its technology, according to Google's SEC filing. In connection with the settlement, Google will incur a non-cash charge in the third quarter, which ends September 30, the filing said. Using the midpoint of the price range of its proposed initial public offering (IPO), Google estimated the charge at $260 million to $290 million. However, there will also be a related tax benefit in the quarter, estimated at $100 million to $115 million.

Google will use the actual IPO price to determine the size of the charge. It expects the charge to send the company into a net loss for the quarter, according to the filing. Google did not estimate the size of that loss.

Search gets proprietary

The licensing deal comes as the major search providers are moving away from using third-party technology in their services, Weiner said. Because they want to use search as a critical part of a larger set of offerings, such as music services, they are developing their own technologies. It would be time-consuming and expensive to integrate another company's technology into these other offerings, he said.

"The only way you're going to create the ultimate integrated tool is to build it yourself," Weiner said.

When it sued Google in 2002, Overture said the company was infringing on a patent for its pay-for-performance service, which let companies bid for placement in search results based on relevant keywords. Advertisers paid Overture to drive traffic to their sites via search engines. In a response then, Google denied the patent-infringement charge.