Back in 2005, online auction site eBay bought VoIP powerhouse Skype amid glowing promises of synergy between the two companies…but this year, admitted that hadn’t really worked out and announced plans to spin Skype back off into its own company with an IPO. However, an unresolved technology licensing battle may derail the plans, because it turns out Skype’s founders managed to retain control of peer-to-peer technology underlying Skype; now they’re looking to kill the licensing agreement saying Skype is in breach of contract.
Under the hood, Skype uses peer-to-peer technology owned by Joltid, run by Niklas Zennstrom and Janus Friis, the folks who founded Skype (and later went on to the video service Joost). Skype had a license to use that technology, but Joltid is accusing Skype of breaching terms of that license, in part by disclosing confidential information in other patent cases. Skype and eBay, in turn, deny any breach of terms and has filed a claim against Joldit in a UK court asking that the original licensing agreement be upheld.
Skype and eBay say they are confident of their legal position, but the company has also disclosed it is trying to build a replacement technology for the Joltid software in case things don’t go well—and in a 10-Q filing with the SEC admits such a move is risky. “If Skype was to lose the right to use the Joltid software as the result of the litigation, and if alternative software was not available, Skype would be severely and adversely affected and the continued operation of Skype’s business as currently conducted would likely not be possible,” the company wrote in its filing.
The trial in the dispute with Joltid is scheduled for June 2010—and the uncertainty of the trail plus the risks inherent in swapping out core elements of Skype have raised doubts about the viability of Skype’s IPO.