Overture Suit Revs Up Battle With Google
If
Overture Services
(OVER)
and
were searching for somewhere else to drag their nasty spat, they found it Friday: the courtroom.
On Friday, pay-per-click Internet search engine Overture said it sued rival Google, claiming patent infringement. Overture said Google infringed a patent covering Overture's search engine, which enables advertisers to bid for placement in the listings returned when Internet users type in their search queries.
The suit takes aim at Google's AdWords service, which enables advertisers to bid for placement among sponsored links viewed by users of its own search engine.
Posing a Threat?
The perceived threat that the privately held Google poses to Overture has dogged Overture's shares this year. In early February, Overture's shares
fell sharply on the news that one of its affiliates,
EarthLink
(ELNK)
, had not renewed its contract to use Overture's search engine technology on its portal, but had replaced Overture's technology with Google's.
Over and Under |
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On Friday afternoon, Overture's shares were trading at $27, down 69 cents.
In January, Overture, formerly known as GoTo.com, filed a similar complaint, arguing infringement of the same patent at issue in the Google suit, against
FindWhat.com
(FWHT)
, another pay-per-click search engine operator.
Given the FindWhat.com lawsuit, Overture's filing doesn't come as a surprise, says Google spokeswoman Cindy McCaffrey. "We have analyzed the patent and determined we do not infringe any valid claim that it contains," she says.
Rise and Fall
In recent months Overture's shares have risen and fallen sharply in response to news about such dealings with competitors, as well as its relationships with affiliates. Companies including
AOL Time Warner
(AOL)
use Overture's search engine on their Web sites in return for a slice of the advertising revenue that Overture reaps. Overture gets the revenue from marketers who pay for prominent placement in the listings that pop up in response to search queries on specific terms.
The company has said that it set its 2002 financial targets assuming that the year-and-a-half-old AOL deal wouldn't be renewed. But that hasn't deterred investors from regarding the AOL contract -- as well as a separate contract with
Yahoo!
(YHOO)
due to expire later this year -- as
important barometers of Overture's financial prospects.
Short-sellers in the company argue that even if Overture wins a contract extension with AOL, the company will inevitably suffer because it will have to hand over
a greater portion of ad revenues to its affiliates than it currently does.
