Google Chief Executive Eric Schmidt on Tuesday denied a widely circulated rumor that his company had set aside $500 million to settle copyright claims by media companies as part of its deal to acquire video-sharing site YouTube Inc.

Google Chief Executive Eric Schmidt on Tuesday denied a widely circulated rumor that his company had set aside $500 million to settle copyright claims by media companies as part of its deal to acquire video-sharing site YouTube Inc.

Speaking to more than 500 Internet industry insiders at the annual Web 2.0 Summit, Schmidt said an anonymous blog post asserting YouTube has reserved $500 million for legal claims, out of the $1.65 billion takeover price, was “not true.”

Web and sports entrepreneur Mark Cuban, an outspoken critic of the Google-YouTube deal, late last month posted a claim from an anonymous blogger that he had inside information on the secret reserve plan.

The blogger claimed to be a digital media industry veteran with inside knowledge of the deal. Cuban introduced the rumor on his Blog Maverick site, saying he had not verified the details, but that the rumor “rings true” and he trusted the source.

The rumor was circulated around the Internet by blogs and picked up by technology industry publications Cnet and ZDNet and a top Google-watching site, Search Engine Watch.

Schmidt was interviewed on stage at a session of the three-day Web 2.0 event by conference organizer John Battelle.