Skype Settlement: Zennström And Friis Have Won It Again

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You’ve got to hand it to Niklas Zennström and Janus Friis. They braved not one but at least two high-risk court actions to wrestle back the phone app they created seven years ago – and it’s they who emerge as winners from Friday’s settlement.

The entrepreneurs – one Swedish, one Danish – have not only secured themselves a 14 percent place back at the Skype table; they have also kicked Index Ventures, the heavyweight European tech VC firm the pair had been suing and which was part of the consortium that successfully bid for Skype in September, off the team.

And, eBay (NSDQ: EBAY) tells paidContent, despite giving over to Skype part of the P2P invention that has made them famous, Zennström and Friis retain the right to use it for for other ventures. Here’s how they pulled it off…

In the right hands, Skype may yet prove enormously lucrative, as telecom networks continue going digital. Having sold to eBay in 2005, Zennström and Friis began their quest to regain the phone app earlier this year, when eBay, thinking about offloading its property, warned shareholders that it depends entirely on software, Global Index, licensed from the pair’s Joltid holding company.

When eBay ripped up a standstill agreement that prevented either side from suing the other, Joltid, sensing an opportunity, responded by threatening to pull Global Index from under Skype. That would have killed the service. eBay interpreted it as a breach of contract and filed against Joltid in London’s High Court in a case that was ongoing.

Niklas and Janus owe their careers to Global Index. Having disrupted the music business by inventing P2P-powered KaZaA in 2000, they formed Joltid to exploit its efficient new P2P delivery infrastructure, first with Skype. When eBay laid down $2.6 billion for the app in 2005, it seemingly overlooked the awful truth – that it didn’t own the very fabric that made the VoIP service tick.

Cashing out of eBay-owned Skype in 2007, the pair turned Global Index’s P2P to a different cause – making online video delivery more efficient through Joost. They hired a networks guy, Mike Volpi from Comcast (NSDQ: CMCSA), as CEO but – by this year, with Hulu, iPlayer and others gaining traction – it became clear that Joost wasn’t going to work out. Some Global Index wins, some it loses.

That’s when things got messy. Deciding to wind Joost down, Volpi jumped to Joost’s part-investor Index as a VC partner. But he was forced out as Joost’s chairman when Joltid started with allegations that Index – itself in the process of part-acquiring a Skype in dire need of its own infrastructure – had tapped Volpi to bring with him Joost’s similar technology for the purpose.

Zennström and Friis, themselves still facing eBay’s legal claim, filed suit against Volpi, Index, eBay and everyone else in the consortium buying 65 percent of Skype from the auction firm – high legal drama. But the settlement takes the court actions off the table.

For them, it’s worked out remarkably well. And, though they have sold ownership of Joltid’s VoIP P2P infrastructure to Skype in exchange for the stake, an eBay spokesperson tells us: “Joltid and Joost have the ability to pursue other non-competitive business opportunities.”

That leaves Zennström and Friis free to turn Global Index, once more, toward revolutionizing another business. Having disrupted music, telecoms and video once before Zennström and Friis are again looking back toward music – little is known about their next startup, Rdio, but don’t bet against the entrepreneurs making waves yet again.

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