Search company, Yahoo Inc., has agreed to compensate advertisers for click fraud dating back to January 2004, as part of a settlement of a class-action lawsuit brought forth by Checkmate Strategic Group Inc. The suit was initiated against Yahoo last year.

The phenomenon of click fraud occurs when people click online advertisements with the intent of generating a charge for the advertisers. Online advertisers often pay for their advertisements based on how many times users click on the ad.

Yahoo has offered to allow advertisers to submit click-fraud claims for incidents occurring since January 2004. As part of the understanding a retired federal judge will oversee Yahoo's investigations, which will determine if credit is due to the advertiser. If Yahoo determines there was fraud and that the advertiser hasn't already received a refund, the company will issue a full credit to the advertiser.

As part of its other moves, aimed at preventing click fraud in the future, Yahoo also agreed to create a new position of traffic quality advocate, who will be responsible for representing advertisers and their concerns about click fraud within Yahoo.

Yahoo also said that it will host an annual event where it will invite a panel of advertisers to its headquarters to review Yahoo's Clickthrough Protection system and offer feedback to Yahoo for improving it.

Yahoo runs a technology that it has developed, called the Clickthrough Protection system, which is aimed at identifying click fraud and removing suspicious clicks so as not to bill advertisers for them.

In addition, Yahoo said it will create a traffic quality resource centre that will offer more information to advertisers and work with a third party to create an industry wide effort to combat click fraud.