Lawsuit places Skype's future in doubt

 

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By Reuters

Posted on 31 Jul 2009 at 08:45

EBay has admitted that pending licensing litigation with Skype's creators leaves question marks hovering over the service's head.

Earlier this year, Skype filed a claim in the United Kingdom against Swedish company Joltid, which is controlled by Skype co-founders Niklas Zennstrom and Janus Friis. Skype sought resolution on a dispute over a software licensing agreement between the parties that Joltid was seeking to terminate.

Joltid brought a counterclaim, reiterating that it holds the rights to the peer-to-peer technology and that Skype is in violation of the original agreement.

The litigation led to speculation that the spin-off of Skype would need to be put on hold, however, eBay claimed in its quarterly filing that it had begun to develop alternative software should the case go against it.

"Skype has begun to develop alternative software to that licensed through Joltid. However, such software development may not be successful, may result in loss of functionality or customers even if successful, and will in any event be expensive," notes eBay in the filing.

It added that if the new software did not work or if eBay lost the right to use the original software, "the continued operation of Skype's business as currently conducted would likely not be possible."

The trial is expected to take place in early 2010 in the United Kingdom.

EBay announced in April that it would spin off Skype through an IPO, saying the timing would depend on market conditions.

Executives acknowledged that the unit, while fast-growing, did not mesh well with eBay's core marketplaces division or its online payments system PayPal. Former chief executive Meg Whitman paid $2.6 billion for Skype in 2005.