Skype Founders Sue eBay, Investors

The founders of Skype have sued owner eBay Inc and an investor group that has agreed to buy the Webphone service, accusing them of copyright violation and potentially disrupting the $1.9 billion deal.

The lawsuit brought by Joltid Ltd, a Swedish firm owned by Skype founders Niklas Zennstrom and Janus Friis, says Skype used its technology without authorization. It comes on the heels of a legal dispute between Joltid and Skype in Britain over software rights.

Filed in Northern California U.S. District Court this week, the latest suit seeks a permanent injunction against Skype and damages. EBay has denied the allegations.

Joltid believes damages are piling up at a rate of more than $75 million a day.

“The Skype companies have continued to infringe Joltid’s copyrighted works on a massive scale,” the lawsuit said. “Each day that the Skype Companies continue to make available its Internet telephone software for download, Skype users download Joltid’s copyrighted works approximately six times per second.”

Ebay licenses peer-to-peer technology from Joltid for Skype, but has begun to develop its own alternative software given the uncertain outcome of pending litigation with Joltid.

“Their allegations and claims are without merit and are founded on fundamental legal and factual errors,” eBay said in a statement.

Analysts have said the once-celebrated Skype business is an incongruous division of an Internet sales and auction house, and many have long urged the firm to spin off the unit or unload it.

The Internet auction house said on Wednesday it remained on track to close the Skype transaction in the fourth quarter.

JOOST BUSINESS

Ebay agreed to sell a 65 percent stake in Skype for $1.9 billion to a consortium including Netscape founder Marc Andreessen’s Andreessen Horowitz, venture firm Index Ventures, private equity firm Silver Lake, and the Canada Pension Plan Investment Board.

Joltid’s suit named those investors as defendants, along with Skype, eBay, and Mike Volpi.

Sources last week said Zennstrom and Friis had contacted several private equity firms to try and buy back their old business.

Days ago, Web TV firm Joost — also owned by Zennstrom and Friis — removed Volpi as chairman.

Volpi had joined Index Ventures by that time. Joost said they were investigating Volpi’s actions during his tenure at the company, but did not elaborate.

Wednesday’s developments are the latest in an escalating legal tussle. Earlier this year, Skype filed a claim in the United Kingdom against Joltid, trying to resolve 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.

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

Skype, whose 2008 revenue rose 44 percent to $551 million, charges for calls to regular telephones but provides free computer-to-computer voice, video and text services. It had about 405 million registered users at the end of 2008.

EBay’s deal valued Skype at $2.75 billion but that was well below the $3.1 billion eBay spent in acquiring Skype.

Its shares rose slightly in extended trade to $24.38 after closing at $24.32. (Additional reporting by Sinead Carew and Ritsuko Ando in New York; Editing by Tim Dobbyn, Bernard Orr)