The Skype-eBay plot thickens. Joost and Joltid, both companies owned by Skype’s founders, have filed a lawsuit against former Joost chairman and CEO, Mike Volpi. The suit also names Index Ventures, the VC firm where Volpi is a partner. In a nutshell, the legal documents say that Volpi obtained confidential information in his role as CEO of Joost about how to circumvent Joltid’s IP. We’ve embedded the legal document that appears to have been filed this morning, below.
Earlier this week, Joltid, the Swedish firm owned by founders of Skype sued eBay and recent Skype buyer Silver Lake Partners and its partners in the buyout, Index Ventures, Andreessen Horowitz and the Canada Pension Plan Investment Board; accusing them of copyright violations. The twist: Skype founders Janus Friis and Niklas Zennstrom also founded Joost and Volpi, Joost’s former chairman and CEO who left the imploding company in June to become a partner at Index Ventures, has been rumored to be a contender for Skype’s CEO position.
While Friis and Zennstrom named Volpi as a defendant in the earlier suit against eBay, it appears that the new suit against Volpi alleges leaking of trade secrets from Joost, breach of contract and “civil conspiracy.”
So what does this all mean? It’s a little complicated and slightly twisted. Yesterday, TechCrunch’s Robin Wauter’s reported that Skype is actively shopping around for companies that provide web-based communication services such as browser-based calling and video chats to add this functionality to the product. What the complaint basically implies is that at Joost, Volpi had access and knowledge of information regarding the ability for the peer-to-peer technology to go to the web. In his role at Joost, Volpi knew how it could be possible to make the switch to a web-based communication service within the source code. This source code is intellectual property owned by Joltid. The reason the bid from the consortium of bidders was so high, was because they all has knowledge (from Volpi and participant Index Ventures) that its possible for Skype to go web-based.
The complaint goes on to say that Google and Microsoft were considering buying Skype and were both aware of the ability for Skype to possibly add web-based functionality but didn’t want to touch it because of the complicated IP situation, since Joltid owns the code. All of that said, the complaint doesn’t have any affidavits or direct evidence that Volpi used this info in the bid to buy Skype.
eBay sold Skype in a deal valuing the peer-to-peer telephony service at $2.75 billion a few weeks ago, with the new investors owning approximately 65% of Skype, with eBay continuing to own 35%. Several months ago, Skype’s founders made their intentions public by announcing they wanted to buy Skype back from eBay. Shortly after this announcement, eBay announced that Skype was to be spun off as a separate company and then IPO.
From a press release issued by Joost/Joltid this morning:
The lawsuit alleges breach of fiduciary duty against Volpi, aiding and abetting breach of fiduciary duty against Index, interference with prospective business advantage, misappropriation of trade secrets, breach of contract against Index, breach of confidence, and civil conspiracy. The suit seeks an injunction requiring the defendants to return to the plaintiffs all documents and files containing confidential information that the lawsuit alleges was misappropriated from Joost, and enjoining the defendants from making any use of the alleged misappropriated trade secrets, among other things.
Update: More TechCrunch commentary on this story here.
Joost –
How do you pay billions for something and not own it all.
This makes web companies look like total morons to traditional corporate deal makers.
Ouch!
I agree with William, seems pretty idiotic to pay billions and not completely own the technology. But on the flip side kudos to the founders of skype, corporate geniuses getting billions for the company and still owning what actually drives the company.
The skype founders come out smelling the worst in all this. Someone please render this technology obsolete already, so these pricks will fade into oblivion.
what a mess!
This is Meg Whitman’s mess. She approved buying Skype without securing the technology.
Just wait until she’s governor of california!
LOL, Delaware is No1 offshore state from EU – tax cheaters
you mean US? Delaware is in the USA, Ireland/Luxemburg and Switzerlands Zug (outside the EU but best option for holdings) are the EU tax heavens…
wow – just read through this. $ 300 million coming E-bays way.
This is what happens when you take a group of bad people, toss them in a pit and drop in lots of money. They go crazy and rip each other apart. The whole lot of them, Volpi included and maybe especially. I feel bad for the employees and investors of Joost and Skype who ultimately are the losers in the face of this greed, ego and incompetence. Let’s pray Volpi never returns to the Valley – good riddance.
Whoa…not good. Trainwreck ahead!
Yeah, that’s how the ‘SV culture of VC and innovation’ looks through a magnifying glass – just a bunch of greedy bacteria feeding themself.
Joost is still around? Huh.
So much for the operating experience that the VC’s keep pushing for.. take that!!
The document itself is far easier to understand than this confused article. This is written like an awkward episode of Mad Man.
Did Volpi really think he can get away with this? His bid was like the bull in the china shop.
No one was confident about making a move on Skype because of all of their recent troubles with breaches of copyright and license on their software in Europe. Volpi just used his inside information to champion a group of investors to make an aggressive bid based on this information. Information which was not public or exposed to other investors or bidders. By doing so he secured himself as a major share holder and CEO, but he also stiffed other bidders and investors.
This type of coop is very fitting for a warlord in your average central African nation, rise to dictatorship. Not so well though with institutionalized multi-billion dollar investors of tech companies where rule of law exists. He should know better
Never heard of Mad Man. Is it a show about an angry lone wolf tech visionary, set in the 60s, developing computers using tube transistors?
I don’t get this, how the F did eBay buy Skype without buying the core IP behind it?! Have they heard the term “due diligence”..?
As for Skype founders, selling a business and hiding the fact that you are not selling the IP behind it is not a way to do business either…
Skype didn’t hide the fact that IP wasn’t part of it but only Licence to use the IP. It was well publicized due to their alleged breach of IP. This is actually the reason no one felt comfortable bidding on Skype. It was Volpi’s confidential information that showd his group of inverstors the value that Skype has in lieu of these legal issues that made them commit to a bid far aggressive with those not having the inside information. That’s what the lawsuit is about.
Volpi is blamed for using this information to gain control over the company and screw other investors and bidders out of the process; to some of which his secrecy was legally obligated
What a mess.
No one in the deal looks good.
EBay- Stupid for getting involved in this mess in the first place. And she (you know who) wants to be a Gov of golden state.
Skype-for not keeping the tech slate clean.
Founders of Skype-for not having a clean finger after getting paid billions selling Skype to ebay.
Volpi- For being a rotten mind
And NEW investors in Skype- Why the F*** they touched Skype?
This refutes a very interesting NY Times article that speculated that Volpi would help negotiate a settlement between his VC firm and the Skype Founders. It was this theory, that helped justify the purchase price of Skype, given the pending lawsuit.
http://www.nyti...kype&st=cse
Why is everyone believing Friis and Zennstrom here? Do you honestly think Volpi is that stupid? Provided there is clear evidence of wrongdoing, cases involving misappropriation of trade secrets are rarely lost by the plaintiffs.
After all the money they got out of Skype, Friis and Zennstrom look like a couple of thugs.
Let’s not foget that Janus Friis and Niklas Zennstrom was in the pirating . . I mean p2p file sharing . . . business before Skype. These guys are not model citizens, they were in the “elite” scene (even before Kazaa) for quite a while before hitting it with Skype.
Volpi is a valley veteran with a huge network and bought hundreds of companies for CISCO. . . he had opportunities to profit in many many ways through the years and had always kept his nose clean. (reputation is impeccable, just call around)
who you gonna believe?
Old pirates, yes, they rob I…
I’m embedding some of the internal yammer chat we’ve had yesterday and today on this story. I think it gives more insight on how we’re thinking of it. Nik may write on techcrunchIT going into more technical detail:
Replacing the joltid portion would be very easy, especially if he brought in cisco heavywights like drew major. Volpi is infuluential and the skype brand is valuable, this is an excellent investment opportunity. The two founders are way off with their assumptions, they are greedy, and should stop trying to use the law to intimidate. They are ass clowns.
@huh….That’s kinda pathetic…this isn’t kindergarten (or is it?) Volpi’s reputation (outside of Cisco) was indeed once impeccable. He was loved by the valley when he was making everyone rich by buying their companies. But seems he’s lost his way since.
Screwing up Joost may be forgivable out here, but that plus screwing up this deal (and costing his investors $300M)….that ain’t good.
there’s only one question regarding this litigation here in my opinion: can joltid proove that Volpi unlawfully accessed the joost computers and copied the source-code as they claim on page 17 in the document?
i mean, it’s not that you’ve to give a DNA sample every time you log-in to your corporate computer (yet)… ecen then, DNA could’ve been obtained from Volpi without him knowing…
i predict that this is gonna be a fuckin hard trial for joltid…
everything else is just blah-blah IMHO…
wao, what so good about america? u don’t like it, u sue it? u don’t own it, u also sue it!
There are significant parts of this lawsuit that look to me to be deluded at best, and deliberately misleading at worst. For example, the claims that suggest it’s somehow impossible for those practiced in the art of developing software to write a piece of software that replaces another piece of software, are nonsense.
The truth is – most organizations with the financial resources and ability to hire top talent would be pretty relaxed about their ability to develop pretty much any piece of software, with any functionality they want, on short timescales. The exception to this would be in areas where hard-won domain knowledge is needed to create the software. P2P does not fall into that category. In other words, P2P software is not rocket science (where “rocket science” is short-hand for a domain that takes a long time to gain understanding at the state-of-the-art).
Companies like Skype, then, are valued not on their IP (or their licenses to IP!), but on the sizes of their user bases and the potential to “lock in” and monetize those user bases. That’s why Skype reached a multi-billion dollar value, and Joost didn’t: i.e. because almost no-one has ever been interested in using Joost; whereas huge numbers of people use Skype.
So… writing P2P software is far from rocket science; writing software that can tunnel through firewalls is far from rocket science; removing P2P functionality from a piece of software and replacing it with a different architecture e.g. client-server, is far from rocket science. It’s hard to understand how a team of skilled developers could possibly require access to, or need any detailed knowledge of, any licensed IP, in order to do any of these things.
Now, having said all that, there may well be something to other aspects of the suit e.g. allegations relating to breaches of license, or other commercial agreements. I really don’t know; and I’m not in a position to judge. However, for sure, much (perhaps all) of the stuff in this suit that relates to the technicalities of software development in general, and P2P software development in particular, are rather wide of the mark.
So, to claim that the value of any piece of P2P copyright code, or the value of any P2P trade secret code, could be worth anything remotely close to billions of dollars seems to lack credibility. At most, I’d have thought the value could be tens of millions of dollars (and that’s probably stretching it).
Disclosure: one of my business partners works with Index Ventures. However, I have: no affiliation with Index; no special knowledge of this case; and nothing other than a general professional interest in the outcome of this litigation.
Joost VS. Mike Volpi – Now in AllRise online court – Join in and cast your vote http://bit.ly/AllRise257
Some people should just stay at big companies. Volpi’s record since he left Cisco has been disasterous.