Don’t be fooled. Even though there hasn’t been any news on the various lawsuits around Skype’s intellectual property ownership, that doesn’t mean things aren’t happening behind the scenes.
Negotiations continue, say multiple sources, between eBay, the new proposed Skype owner group, and the original founders Janus Friis and Niklas Zennstrom, via their company Joltd, in what is turning into a very high stakes and very emotional game of poker.
Joltid first sued eBay/Skype in July 2009, claiming breach of a license agreement that granted Skype the use of key technology.
Multiple sources have confirmed to us that settlement negotiations were underway with Joltid to give the company a percentage of Skype to drop the litigation. Joltid was to receive “between 5% and 15% of Skype” to settle.
But the announcement of an agreement to sell most of Skype to a new investor group scuttled the settlement, say our sources, because of the massive debt that the company would be burdened with following the closing. Part of the purchase price for Skype is lender financed, and the debt would be on Skype’s books.
The breakdown in negotiations led to the second Joltid lawsuit. Our sources say that a settlement should be possible, but that emotions are keeping the parties apart. “We’re talking about some very rich, very emotionally immature people here. On both sides of the table. It’s not about money, it’s about saving face.” The fact that so much of the conflict is playing out in the press is evidence of this as well.
There’s another odd issue here as well. In the first lawsuit, Joltid claimed that Skype misused Joltid source code: “In particular, Joltid has alleged that Skype should not possess, use or modify certain software source code and that, by doing so, and by disclosing such code in certain U.S. patent cases pursuant to orders from U.S. courts, Skype has breached the license agreement.”
But the second lawsuit by Joltid claims that Skype never had the source code to begin with. The lawsuit’s goal is to prevent them from getting it. From the lawsuit: “An executable-only object code form of the GI Software was licensed by Joltid to Skype, a well-known Internet-based company that provides users throughout the world with free or low-cost telephone services over the Internet. Skype did not obtain a license to the GI Software source code, however, and the license it did obtain was terminated based on Skype’s breaches of the license agreement.”
Our sources say that Skype does indeed have the GI software source code, although it isn’t clear if they have a right to it or not. The key issue seems to be that they modified that software and disclosed it to third parties.
Skype has long been attempting to rewrite their P2P engine so that they wouldn’t have to rely on that Joltid code, we’ve heard from former employees, but they’ve been unsuccessful to date. Skype can move away from P2P to a purely SIP based infrastructure, but bandwidth costs would skyrocket. Skype is supposedly 7% of all international long distance minutes today, mostly from Skype to Skype calls that use the P2P backend. Paying bandwidth charges on those calls isn’t attractive, and Skype appears to be unable to develop a P2P based SIP infrastructure that performs well.
Game theory suggests that the multiple parties would work the situation out. Shutting down Skype just doesn’t make sense. But as we said, emotions are running hot right now, and now no one seems to want to back down.
The buyers group has certain protections from the litigation in their purchase agreement. Specifically, they don’t have to close the deal if there are injunctions around the lawsuit (meaning Joltid wins). And if the transaction closes, eBay is on the hook for 50% of any damages.
The likely outcome of all of this remains the same – Joltid will get a stake of some size in Skype. But given the players involved, anything could still happen.
“and now one seems to want to back down.”
you mean “no one”?
Who needs Skype?
Me
You got to fight…
For your Skype…
And VOIP services!!
You know why there is a fight right?
in the U.S., AT&T and Verizon will start to offer blanket Wifi over the FCC white space in a few years. Other companies in other regions of the world will soon follow.
Skype, due to the established popularity, is destined to become the phone technology of the future, with such an established brand, the owners can make a ton of money.
Ebay was right in buying Skype, but should have made sure all of the assets to the technology was acquired in that deal. Now it is a gold rush.
Joltid owns the software. I don’t see no problem here.
If only it was that easy. One thing is sure, the joltid guys have destroyed their reputations. And their tech will be replaced by something better. They look to lose the most.
It seems impossible for Skype to come up with a P2P backend that’s not based on Joltid’s code, if they’ve already seen Joltid’s code. If somebody gives one a homework assignment, and then gives one a solution, and then says, solve this problem without using the solution that you have in your hands, what is one supposed to do? Magically forget the solution?
Skype only has the binaries.
read a little closer, they clearly state that they have the source code.
hey Mike are you getting less traffic with twitter frozen? I think so
Its not enough that these a-holes sell the p-o-s for $2.6B +++ They now want more……
@Webstandard – I tottaly agree. If you don’t make long distance calls – who needs Skype. Is anybody using this a small business office telephone solution? If not, I don’t see Skype ever getting much bigger and Google Voice will clean their clock at some point.
I use Skype all the time and I don’t call internationally. I use it for video calling and it’s great. I also use it to do voice calls locally on my iPhone when I’ve got Wifi and soon I’ll be able to do the same over 3G. With Google Voice, the calls are all made over the normal phone network, so the “free” local calls aren’t free at all, I’m still using my minutes.
I loved skype, used it for int’l calling and all my long distance. I even had the skype in number. Now facing renewal with an uncertain Skype or the transition to google voice, the choice is obvious. Time to make google voice my prime phone app, and skype gets booted down to an as needed service. Sorry Skype, you brought this on yourselves.
Any estimations on how much bandwith SIP would cause? The actual voice traffic would after all not go thru Skype.
very good post. will be interesting to see how this all plays out
Wow, who knew skype was so cheap
“Acquired: September 12, 2005 by eBay for $5 in Cash”
Just think if that person didn’t have a 5 spot on them, where would we be now?
These people feel no responsibility other than greed.
I’d be more than glad to swap to a competitor since any Skype software development is virtually non existent.
Any suggestions?
Skype is many things. But one of them is that they are now the dominant IM system. I’d find that very hard to give up, especially group IM chats.
I’m not sure I understand your argument about SIP bandwidth charges at all, at all. Skype already uses SIP for the POTS interconnect and some of the transport to the best POTS interconnect point for the call you’re trying to make. Even if a SIP based skype-skype call was SIP initiated it would only be for the initial hand shake. After that it would be p2p, wouldn’t it? Or are we talking about centralised relay servers for NAT busting to replace JoltID’s supernodes? Any JoltID replacement is going to want/need to avoid running lots of traffic through central servers to get round NAT[1]. Google or Microsoft might be able to get away with this, but nobody else is going to want to deliberately choose this route.
[1]Maybe by the time this has all panned out, we’ll all be using IPv6 and NAT busting will become moot. Yeah, right,
All good points, but I would look to cisco in the future. They are already heavily invested in this space, plus they have some secret sauce of their own in reserve.
good point – I´ve heard recent rumors that there are a group of patents which pre-date Skype technology – wouldn´t that be leverage enough for eBay in it´s negotiations with Joltid to counter any of theirs claims?
@Michael Arrington, Skype isn’t the only group with the Global Index source code and yes they obtained it illegally. Joltid never handed over the keys to the kingdom to eBay/Skype, they just weren’t very protective of what occurred during the formation of what was Joost and the leader that was chosen. The later is a big sidestep from what was occurring when I was working on FastTrack and Skype was in the lab making it’s first call in Estonia from peer A to peer B less than six months earlier. I’m less than enthusiastic about this and Q1 of 2010 there will be an event to end all.
“Skype has long been attempting to rewrite their P2P engine so that they wouldn’t have to rely on that Joltid code, we’ve heard from former employees, but they’ve been unsuccessful to date”
Why wouldn’t Skype announce an open competition (similar to Netflix one) to create required functionality? This could be a interesting way to solve the issue:
- Specifications, scope and performance requirements for the program can be precisely identified at this stage as it already exists
- The winner will get a sizeable prize (1 to 5 million dollars) providing the right financial incentive
- All entries will be confidential and will assign the rights to the code to Skype upon submission
- No existing Skype/Joltid and etc employees are permitted to enter the competition only third-party coders. Thus, no entries will be tainted with existing Joltid code
There are a lot of very bright hackers that will pick up the challenge. If one group of programmers could do it, so can another group…
No contest need, just the right people. Your contest proves you don’t know much about technology. And your faith in “hackers” is plain moronic. By the time they pull their heads out of their ass, they will have lost any advantage. This is obviously joltid’s motivation, they can’t stand that others profit more than themselves.