Skype under threat from eBay licence row

Millions of internet users who use Skype could be forced to find other ways to make phone calls after parent company eBay said it did not own the underlying technology that powers the service, prompting fears of a shutdown.

The internet auction company paid a total of $3,1-billion for the telephone service between 2005 and 2007 and is now locked in a legal battle with the technology’s owner, Joltid, a company owned by Skype’s founders. That may make it impossible for eBay to follow its plan to float Skype on the stock market next year — and give one of Skype’s creators, Niklas Zennström, the upper hand in any negotiations. Zennström has been angling to buy the company back.

Skype is a big money-earner for eBay. It has more than 480-million registered users and revenues of $170-million for the last quarter. It does not need telephony systems as people’s own computers route traffic over the internet; its only significant costs will be payments to telephone operators where calls exit the internet, for which Skype’s customers pay.

eBay says that it filed a claim against Joltid in the English high court in March, and that Joltid, which owns the key technologies for Skype, then “purported to terminate the licence agreement”. Without the licence, Skype may be worthless to eBay because it will be unable to run it legally — or might have to pay swingeing licence fees to keep it going.

However, eBay’s legal counsel insisted that “our plans to separate Skype have not changed”. There was no other comment from eBay on the litigation.

The case has arisen because Joltid, set up in 2001 by Zennström and Janus Friis — who both went on to found Skype in 2003 — licenses its software to Skype, which enables the company to build its huge internet telephony system, which connects millions of computers. Whereas most systems only connect a couple of computers, Skype’s distributes the call among thousands of machines, making it extremely robust.

Joltid alleges that Skype “should not possess, use or modify certain software source code” and that eBay has disclosed some of that code in US patent cases following US court orders. It is seeking to revoke Skype’s licence on the basis of copyright infringement and misuse of confidential information.

Although the case is not scheduled to be heard until June 2010, it leaves eBay at the mercy of Zennström and Friis in any attempt to float or sell off Skype. Without Joltid’s licence, Skype would have to develop a new software system while not disturbing its existing half-billion users. –

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