Summary:

Updated: A settlement has been reached that should wipe the slate on all of the litigation involving Skype and its founders, paving the way…

Skype And Ebay
photo: AP Images

Updated: A settlement has been reached that should wipe the slate on all of the litigation involving Skype and its founders, paving the way for the unit to be spun out of eBay (NSDQ: EBAY) — and also will wipe Index Ventures out of the picture, paidContent has confirmed. Reports of a possible settlement started to surface this week from Om Malik, the New York Times, AllThingsD and Bloomberg . The announcement from eBay and the reconstituted investor group was due after the market closed Thursday but that doesn’t seem likely at this point. The next window would be before the market opens Friday. should come after the market closes today. Skype founders Niklas Zennstrom and Janus Friis, who have been suing the investment group, eBay, dealmaker Michaelangelo Volpi and Index Ventures, become part of the investment group; Index and Volpi are out. (What’s the private equity version of “pack your knives and go?”) My understanding is that this will settle all of the litigation — in Delaware, California and the UK — including the dispute over eBay’s use of the code Skype runs on. That P2P code is owned by Joltid, the Zennstrom-Friis firm; Joltid accused Volpi of stealing trade secrets related to the code when he was CEO of Joost.

It’s not clear whether the deal, which keeps eBay as a minority partner with 35 percent in a new joint venture, is still valued at $1.9 billion. The rest of the investment group should remain the same: Silver Lake Partners as the lead with Andreessen Horowitz LLC (Marc Andreessen is also on the board of eBay) and the Canada Pension Plan Investment Board.

The irony in all of this — well, surely there’s more than one bit — is that until the bitterness spilled out between Volpi, Zennstrom and Friis, the former Joost CEO was viewed as the one person who could solve the dispute between eBay and the Skype cofounders. Instead, it’s his absence. More to come.

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