* Microsoft to pay $1 million up front to Vringo
* Lawsuit focused on patents involving search engine advertising
* Vringo unit had won $30 million verdict against Google, others
By Nate Raymond
NEW YORK, May 30 (Reuters) - Microsoft Corp has agreed to settle a lawsuit accusing it of infringing patents that enable Internet search engines to place advertisements most effectively.
Vringo Inc, whose I/P Engine Inc subsidiary filed the lawsuit in January, announced the settlement on Thursday. Microsoft has agreed to pay $1 million and enter into a licensing agreement as part of the agreement, according to Vringo's U.S. regulatory filings.
A Microsoft spokeswoman confirmed the accuracy of Vringo' description of the settlement but declined to comment further.
In the lawsuit, filed in U.S. District Court in Manhattan, I/P Engine said Microsoft had used search technology based on inventions by two employees of Vringo.
The lawsuit came after a jury in Virginia awarded I/P Engine about $30 million in damages after fining companies including Google Inc and AOL Inc for infringing the same patents at issue in the Microsoft case.
That verdict last November was seen as a disappointment for Vringo, which had been seeking at least $696 million, and its stock fell as much as 10 percent following the news. An appeal is pending.
The patents at issue were acquired by I/P Engine from Lycos Inc, the once-popular search engine created in 1994. The two inventors of the patents now work at Vringo, the lawsuit said.
As part of the settlement, Vringo said Microsoft had also agreed to pay 5 percent of any amounts Google pays to use the patents.
The sum is subject to a cap, although Vringo said that would not affect the company unless the amounts received from Google exceed the judgment it won at trial.
Microsoft also agreed to assign six patents to I/P Engine for telecommunications, data management, and other technology areas, Vringo said in its filing with the U.S. Securities and Exchange Commission.
Vringo's shares were up 3.5 percent at $3.24 in midmorning trading, while Microsoft rose 0.5 percent to $35.07.
The case is I/P Engine, Inc v. Microsoft Corp, U.S. District Court, Southern District of New York, No. 13-688.