Skype founders trying to shut down the new Skype?
Joltid Ltd, a British Virgin Islands company founded in 2001 by Niklas Zennstrom and Janus Friis, the team that created Skype, Kazaa, and Joost, is threatening to shut down eBay’s Skype service. Skype’s approximately 450 million users generated $500 million in revenues in 2008, a figure expected to grow to $1 billion for 2011, according to the Wall Street Journal.
eBay bought Skype from Joltid Ltd in 2005 for $2.6 billion, but the deal did not include the complete assignment or transfer of the “Global Index P2P software,” merely a license for this core technology component.
Joltid Ltd. still holds a key patent on the content distribution platform technology that allows Skype to manage bandwidth efficiently. US Patent number: 7480658 filed on 14 July 2004 lists Joltid Ltd as the owner, and the Estonian programmers Ahti Heinla and Priit Kasesalu as the inventors of the technology.
eBay’s 10Q quarterly report filed with the SEC disclosed that in March 2009, Skype Technologies S.A. filed a claim in the English High Court of Justice (No. HC09C00756) against Joltid Ltd. due to its cancellation of the software license, and Joltid counterclaimed for copyright infringement and license repudiation. The outcome of the dispute will be determined by the UK trial scheduled for June 2010.
Joltid has now canceled eBay’s license, and if effective, the cancellation could disable the whole service, as re-engineering the entire P2P architecture for half a billion users around the world within 10 months would be a mission to mars. eBay would have to rapidly develop, test and roll out world wide an alternate non-infringing technology, license an alternate technology, or abandon the service altogether. According to the 10Q eBay has chosen to try to develop an alternative technology.
This kind of an IP disaster is reminiscent of the Volkswagen deal to buy various Rolls Royce and Bentley factories and assets, but failing to buy the Rolls Royce trademark which was sold to BMW. For more embarrassing IP disasters look here.
The moral for entrepreneurs - make sure that you get qualified advice when negotiating and documenting technology deals to avoid such colossal PR, technology and financial disasters. The advice applies equally to those start-up founder/heroes that fancy themselves Renaissance-men capable of playing any role in any company, consultants that attempt to give occasional IP advice as an up-sell on their other services, and those CEOs thinking that their in-house lawyers should be able to handle it - I mean - how hard can it be?
eBay and Volkswagen found out the hard way.