eBay Goes To Court To Hang On To Fabric Of Skype

With Robert Andrews: Skype is taking to court the owner of the very P2P infrastructure on which it depends, in a licensing dispute that could even kill the internet phone company in its current form. Parent eBay (NSDQ: EBAY) filed suit in London’s High Court against Joltid, a Jersey, England-based company started by its own founders Niklas Zennstrom and Janus Friis that licenses its vital peer-to-peer technology.

After founding P2P filesharer KaZaA then selling it to Sharman Networks in 2002, Niklas Zennstrom and Janus Friis went on to start Joltid, further developing peer-to-peer technologies for distributed storage and communication. Zennstrom and Friis picked Joltid’s Global Index product to underpin Skype’s efficient means of routing internet voice calls, and the license has been in effect since.

Skype recently ripped up an agreement allowing either side to take action beginning March. But, according to eBay, Joltid, actually registered in the British Virgin Islands, says that’s a breach of terms and tried to end the licensing relationship. So eBay has asked the High Court to rule the termination attempt “invalid” and delcare Skype is not in breach. The case was scheduled to be heard at the High Court on Friday.

eBay’s release says: “Skype strongly refutes those allegations and is confident of its legal position.” But its SEC filing shows how worried it really is – to put it baldly, Skype would be finished: “As with any litigation, there is the possibility of an adverse result if the matter is not resolved through negotiation. In such event, Skype would be adversely affected and the continued operation of Skype’s business as currently conducted would likely not be possible.”