Skype saga gets stranger: Joltid's spat vs. eBay is A+++++

Now Skype's founders are suing eBay for "theft" of their technology. Their company, Joltid Ltd., alleges that eBay didn't buy it and has withdrawn the license. Remember when we told you that eBay was auctioning Skype? In IT Blogwatch, bloggers dig behind the news and continue the criticism of eBay's ex-CEO Meg Whitman.

By Richi Jennings. September 17, 2009.


Your humble blogwatcher selected these bloggy morsels for your enjoyment. Not to mention Pug Head Tilt...

Geoffrey A. Fowler growls:

A company owned by the founders of Skype filed ... suit against eBay Inc. and a group of investors that plan to buy Skype from eBay. ... The suit, filed Wednesday in the Northern California U.S. District Court, extends the drama behind eBay's tumultuous relationship with Skype.


Janus Friis and Niklas Zennstrom, left Skype in 2007, two years after eBay bought [it]. ... Their company, Joltid Ltd., has been embroiled in an intellectual property dispute with Skype since March, putting a cloud over eBay's efforts to unload Skype. At the heart of the dispute is a peer-to-peer technology called "global index" that is owned by Joltid. That technology is also used at the core of Skype's software, which routes calls over the Internet instead of traditional phone lines.

Dan Frommer observes:

This is getting ugly! ... Skype's founders -- who tried and failed to buy Skype from eBay earlier this year -- have been fighting in court about ownership of Skype's underlying technology for some time now. But this suit now involves the new investor group, which includes Silver Lake, Index Ventures, Andreessen Horowitz, and the Canada Pension Plan.

But why? Dan Goodin has the official answer:

Skype has used Joltid's copyrighted code without permission since March, when a license between Skype and eBay was terminated, lawyers for Joltid wrote in the document. ... In 2007, about two years after they sold Skype to eBay for $2.6bn, the founders learned the buyers had "acquired unauthorized versions of the GI Software source code" and that they "created unauthorized modifications" to it for newer Skype versions and also disclosed it to "third persons."


The software "creates a self-organizing and self-healing distributed storage, transportation and data object management system that eliminates the costs of traditional datacenter solutions and enables a range of applications from communications to broadcasting and beyond.

Om Malik chants told you so, told you so, told you so:

This suit comes as no surprise ... I’ve been consistently pointing to this elephant in the room. I’ve heard from various sources of mine from across the pond that there is no love lost among eBay management, the Skype founders and some of the investors in the consortium that’s trying to acquire it.


When eBay bought Skype in 2005, it didn’t acquire Joltid — a major corporate blunder by then-eBay management. Many of the guys who spearheaded the acquisition (and overlooked the fact that they needed to buy the core technology) long ago left the company. ... eBay needs to be held responsible for this clear negligence of its duties.

Michael Klurfeld has the inside scoop:

Seems that Friis and Zennstrom are craftier than I thought. So there was this pending lawsuit in London which had scared away many potential Skype buyers until the most recent acquisition. ... We can say with a pretty high degree of certainty that the buyers worked out a deal with the founders to make sure that their new purchase wouldn’t immediately become worthless.


One of the people who bought that 65% stake in Skype from eBay, Michelangelo Volpi, had been a friend to the Skype founders. ... [But] Volpi seems to have had a falling out with Friis and Zennstrom, which resulted in his being ousted from his position at Joost. ... According to eBay, however, the lawsuit doesn’t have a leg to stand on. It could be entirely possible that the founders are bluffing in an attempt to thwart the deal.

Ben Parr runs the numbers:

The potential damages cited by the lawsuit are stunning, though. They claim that eBay’s altering and misuse of their code could total to more than $75 million per day in damages, as each download of Skype is considered by them to be copyright infringement. If you do the math, that’s over $27 billion per year.


Apparently this is not all that unusual for the Skype founders, according to The New York Times, who reports that they’ve developed a reputation for litigation, stemming from three lawsuits they filed against an investment banker who represented them in the original Skype sale to eBay.

Jeffrey Solari just scoffs:

Friis and Zennstrom must really be geniuses. They sell Skype for $2 billion, but didn't include the key intellectual property. And eBay and Meg Whitman totally missed this. I hope Meg doesn't use the same financial and legal expertise when she is governor of California.

So what's your take?
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Richi Jennings is an independent analyst/consultant, specializing in blogging, email, and spam. A 24 year, cross-functional IT veteran, he is also an analyst at Ferris Research. You can follow him as @richi on Twitter or richij on FriendFeed, pretend to be Richi's friend on Facebook, or just use good old email:

Copyright © 2009 IDG Communications, Inc.

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