Skype reaches settlement with original founders over license dispute

Online auction giant eBay has won the right to keep using the VoIP technology that underpins its Skype service, after a legal dispute with the service’s original founders was finally settled.

The settlement comes after months of speculation regarding Skype’s future, during which eBay itself warned investors that the VoIP service may be forced to shut down if alternative technology could not be developed.

An agreement was reached last week, with Skype co-founders Janus Friis and Niklas Zennstrom agreeing to hand over full ownership of the VoIP technology to eBay and its new investor owners.

In return, Friis and Zennstrom have been offered positions on Skype’s board of directors, now own a 14% stake in the company and were reportedly given a cash payment for an undisclosed amount.

“This has extremely positive implications for us on three critical fronts. We will now have ownership of the software previously licensed from Joltid, so we’ll be in control of our technology future,” Skype president Josh Silverman wrote in a blog post.

“All litigation against eBay, Skype and the investor group ends, so we’ll be free to concentrate all our efforts on building the world’s greatest communications software.”

eBay president and chief executive John Donahoe also said in a statement that Skype is “well positioned” to move forward under the ownership of several investor groups, and the settlement will allow the deal to move forward.
“Skype will be well positioned to move forward under new owners with ownership and control over its core technology. At the same time, eBay continues to retain a significant stake in Skype and will benefit from its continued growth. We look forward to closing the deal and focusing on growing our core eCommerce and payments businesses.”
The legal dispute had cast doubt on the deal between eBay and a group of investors that will see Skype sold for $US1.9 billion. While the deal had been confirmed by eBay and the group, which includes Andreessen Horowitz, Index Ventures and the Canada Pension Plan Investment Board, the legal action had thrown the future of the company into doubt.

When eBay purchased Skype from Joltid and its founders, Friis and Zennstrom, it did not purchase the technology required to operate the software. Instead, they licensed it at an ongoing cost.

But Friis and Zennstrom pulled the license, throwing the two companies into a tense legal battle. eBay said in a submission to federal authorities that if an alternative technology could not be found, then it would be forced to shut Skype down permanently.

Such a move would be a major blow to eBay, as Skype recorded $US551 million in revenue for 2008. It currently has 405 million registered users, and accounts for about 8% of all international voice traffic.