Well, hello! First off, Yahoo's never initiated a lawsuit with Google. It was Overture that sued Google in 2002, when they refused to license their patent for search ads. Yahoo acquired Overture a year later, and it settled out of court.
Sure, Yahoo could've just dropped the case, but I think that's different from initiating a lawsuit against a competitor.
Up until this week, Yahoo was never known for using their patent portfolio as a weapon. They'd built up defensive assets to protect against other competitors, but didn't use it offensively. They even worked with Google, Facebook, and others to defeat patent trolls like Eolas.
You can say what you like, but you weren't there. Ask other people who were, and they'll tell you the same thing: in 2005, Yahoo had bright prospects, they were making solid progress, and everyone was optimistic. Some of the most intelligent, creative people I know have their names on Yahoo patents, and they signed the contract for many of the same reasons I did -- the patent system is deeply broken, but the only sane strategy for a company Yahoo's size is to build a defensive portfolio. And we regret it.