DivX sues Yahoo!

BANGALORE, INDIA: DivX, Inc., a digital media company that creates, distributes and licenses digital video technologies has filed a lawsuit against Internet company Yahoo! related to an advertising deal signed between the two companies.

The lawsuit has been filed in California Superior Court in Santa Clara County. DivX has said that this decision would hurt their results for 2008 and 2009.

The company in a statement said, “Yahoo!’ s decision to breach is unjustified given DivX’s fulfillment of its obligations under the agreement.”

According to various media reports, the Yahoo-DivX deal was worth at least $5 million for this fiscal year.

According to the agreement it would have offered consumers who downloaded DivX video software tools a co-branded version of the Yahoo Toolbar, along with a Yahoo services-loaded version of IE 7.

Meanwhile media reports quotes Yahoo spokesman, Adam Grossberg, saying the companies had been trying to rework the terms of the deal but "could not come to an amicable resolution."

Yahoo is "disappointed DivX decided to pursue legal action" and that company will "defend itself vigorously”, he said.