Money Matters - Simplified

Skype founders sue eBay for copyright violation

In the lawsuit filed Wednesday, the founders claimed that their technology is being violated by Skype users "in the United States at least 100,000 times each day"

New York, September 17 -- In a continuing battle against eBay Inc., the founders of Skype have filed a lawsuit against the company alleging copyright violation.

Skype's founders, Janus Friis and Niklas Zennstrom, had sold Skype to eBay for $2.6 billion in 2005 but retained the rights over Global Index Software through Joltid Ltd, a company they later established.

But eBay has shared the software code with third parties and modified it without seeking permission, according to the lawsuit.

Global Index Software, peer-to-peer technology behind the Skype service, is used to routes calls over the Web instead of traditional phone lines.

Joltid to seek injunction and damages
The lawsuit, latest move in the ongoing dispute over the popular VoIP service, was filed Wednesday in the Northern California U.S. District Court. The two companies are also involved in a separate legal battle in UK and trail is scheduled for next June.

In the lawsuit filed Wednesday, the founders claimed that their technology is being violated by Skype users "in the United States at least 100,000 times each day".

“Skype has infringed Joltid's copyrights," a company spokesman said in a statement. "Joltid will vigorously enforce its copyrights and other intellectual property rights in all of the technologies it has innovated."

The lawsuit seeks injunction against Skype and damages, which Joltid "reasonably believes are amassing at a rate of $75 million daily".

Lawsuit could impact Skype’s sale
The ongoing lawsuit could complicate the sale of Skype. Earlier this month, there were reports stating that eBay was considering selling Skype to consortium of investors.

The company had brought Skype with an aim to upgrade its core auction business by using Skype’s new technology to enable buyers and sellers to talk to each other in its online marketplace, but the plans collapsed.

eBay, which plans to close the deal in the in the fourth quarter this year, stated that Joltid’s “allegations and claims are without merit and are founded on fundamental legal and factual errors”.

"If the matter is not resolved through negotiation," the company said, the "continued operation of Skype's business as currently conducted would likely not be possible". eBay is working to develop its own software to replace what it got from Joltid.

Joltid has also named all of the investors likely to buy Skype as defendants. They include Andreessen Horowitz, Index Ventures, Silver Lake Partners, Michaelangelo Volpi, and the Canada Pension Plan Investment Board.