Yahoo originally rejected the idea of co-operating with Google on search advertising, reaching the decision just prior to Microsoft's failed takeover bid, it has been revealed.

Last month Yahoo conducted a two-week trial of running adverts on its search results that were provided by the Mountain View firm, instead of using its own advertising platform. Google chief executive Eric Schmidt has suggested that further co-operation between the two companies could take place in the near future.

But paperwork released yesterday as part of a Yahoo court case has revealed that the firm was formerly opposed to such a partnership.

A statement dated 30 January, the day before Microsoft made its original $44.6bn (£22.7bn) offer, dismissed any such collaboration as being bad for market competition.

"We are focused on long-term value creation rather than short-term gains," said the document.

"Short-term analysis of the revenue potential of outsourcing monetisation may not take into account the longer term impact on the competitive market if search becomes an effective monopoly."

The papers were published as part of a shareholder battle between Yahoo and lawyers representing a pair of Michigan pension funds. The two funds want to renew the takeover talks with Microsoft, which collapsed last month.