eBay’s Newest Headache, Dealing With Skype Founders Over Licensing Issues

Posted Jul 31, 2009

The world has become a complicated place. It was to my understanding that if a bigger company made you a millionaire a few years ago and you did not have to work for them anymore, you’d just take your money and be happy on some island.  Apparently the founders of Skype have decided to give eBay a hard time even though the company bought them out for $2.6 billion in September 2005.  What more could the two founders want?

eBay wrote in their quarterly filing that there is pending litigation over the technology that Skype uses to operate.  Skype uses a technology licensed from Joltid Ltd.  Joltid is a company run by Niklas Zennstrom and Janus Friis. Aside from starting Skype together, Friis and Zennstrom have also built P2P software KaZaa and P2P video streaming service Joost.

Joltid was seeking to have a licensing agreement terminated on Skype.  Skype filed a claim in the U.K. against Joltid’s push for licensing termination.  But Joltid filed a counterclaim reiterating that they hold the rights to the P2P technology used by Skype.  The trial will be taking place in early 2010.  To mitigate the risk of Joltid having too much software power over Skype, eBay has started developing their own P2P VoIP technology.

“Skype has begun to develop alternative software to that licensed through Joltid. However, such software development may not be successful, may result in loss of functionality or customers even if successful, and will in any event be expensive,” stated eBay.

In April, eBay announced that they are planning to have Skype spin off as its own independent company and have an IPO of their own.  Last year, Skype made $551 million in revenues alone.  Skype’s expected revenue for 2011 is about $1 billion.  eBay said that this setback will not hinder their future plans for Skype.