Skype's Former Owners Sue eBay

by Mike Godfrey, Tax-News.com, Washington

22 September 2009

The Swedish founders of Skype, Niklas Zennstrom and Janus Friis, through their company Joltid Ltd, are suing eBay Inc and a group of prospective investors in Skype for breach of copyright. The action filed in North California is seeking a permanent injunction and damages accumulating at USD75m a day. eBay proposes to sell 65% of Skype shares for USD1.9bn.

The action is a continuation of a legal dispute initiated in the London courts. According to information filed by eBay with the SEC earlier this year, "Skype licenses peer-to-peer communication technology from Joltid, and Joltid has claimed that Skype has breached the terms of the license agreement. Joltid purported to terminate the license agreement. In particular, Joltid has alleged that Skype should not possess, use or modify certain software code … and it has breached the license agreement."

Skype claims it:

• "is lawfully accessing, in possession of, using and modifying the Code so that Skype is not in breach of the license agreement with Joltid and accordingly Joltid’s notice of breach and subsequent notice of termination are invalid;
• lawfully disclosed the Code in the US patent cases so that Skype is not in breach of the license agreement with Joltid and accordingly Joltid’s notice of breach and subsequent notice of termination are invalid; and
• Joltid has certain indemnity obligations in relation to the US patent proceedings."

It is expected that the legal action will eventually be tried in the English courts in 2010. The prospective investors in Skype are Netscape founder Marc Andreessen's Andreessen Horowitz, venture firm Index Ventures, private equity firm SilverLake, and the Canada Pension Plan Investment Board.

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