A lawsuit filed this week alleges that Yahoo is charging advertisers for "premium" ads that are displayed on illegal sites that show spyware pop-up ads and typosquatter sites that appear when a surfer misspells a Web address. Instead of the "highly targeted" sites the ads are supposed to appear on, the ads end up on low-quality sites that show random ads and little or no bona fide content, according to the lawsuit, filed Monday in New Jersey federal court.

Microsoft scored an important win against rival Google, as Amazon.com began using its technology to power the Internet retailer’s A9 search unit. Microsoft’s new Windows Live is at the core of the company’s efforts to win online advertising dollars away from Google and Yahoo. A9 had previously been powered by Google. Amazon’s search engine, A9, breaks down searches into various categories, such as Web searches, book searches, and blog searches. It is a stand-alone search site, www.a9.com, as well as the search technology used on the Amazon.com Web site.

Software giant Microsoft has held discussions to buy a stake in Yahoo to compete against Google, The Wall Street Journal reported Wednesday. Although talks over an equity stake do not appear active, Microsoft’s top management remains open to a deal with Yahoo as pressure grows from shareholders to perform better against Google, the newspaper cited people familiar with the situation as saying.

A new version of the upstart Firefox Web browser has been released to patch a "critical" flaw that could lead to the execution of malicious code. According to Mozilla, Firefox 1.5.0.3 fixes a publicly reported denial-of-service bug that can theoretically lead to a more serious security issue. Mozilla described the flaw as crashes that were discovered to ultimately stem from the same root cause: attempting to use a deleted controller context when designMode was turned on.

High-profile employees at Microsoft and Yahoo say rival Google’s complaints to authorities about a supposed unfair Microsoft practice is a case of the pot calling the kettle black. The rhetorical salvos result from Google’s reported complaints about the new Internet Explorer browser, version 7, from Microsoft, which comes with an embedded Microsoft search engine. The problem, Google says, is that Microsoft makes it very difficult to swap out this search engine for one from a rival.

Just what does Microsoft plan to spend all those billions of dollars on? That’s the question that Wall Street has been asking since last week, when the company announced that it would pay out far more than expected in the next 15 months–roughly $2.4 billion according to estimates–as it bulks up several of its new business efforts, particularly its online services. Investors may get some answers this week, as the software maker hosts an annual gathering for hundreds of MSN advertisers and other ad industry notables. Microsoft is expected to give further details of its strategy and to show off some of the earliest fruits of its labors.

The FBI’s use of a Patriot Act provision that lets it make secret requests for subscriber information from Internet service providers drew scrutiny from U.S. senators on Tuesday. At a wide-ranging oversight hearing convened by the Senate Judiciary Committee, FBI Director Robert Mueller faced a number of questions from Democrats voicing concern over the scope of the controversial investigative tactic, known as a National Security Letter, or NSL. Federal law requires communication service providers to provide records about individuals in response to such letters, which do not require the use of a court warrant. Legal challenges to that measure’s constitutionality are still pending.

The wait for Microsoft’s delayed Windows Vista could be even longer than expected, according to a research report issued this week. In March, Microsoft announced that widespread distribution of Windows Vista would be delayed until early 2007. Now, research firm Gartner Group has reported that the operating system might not be fully available until at least the second quarter of next year.

Microsoft tentatively agreed to pay $70 million in vouchers to several California municipalities to settle an antitrust claim that it used its market dominance to overcharge government customers. The class action suit was filed in August 2004 by the cities of San Francisco and Los Angeles and the counties of Santa Clara, San Mateo, Los Angeles and Contra Costa. The agreement is still pending court approval.

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