IP Dispute Could Threaten Skype

Online auction site eBay, the owner of popular, proprietary voice-over-internet protocol software Skype, has warned that the service might not continue if it loses an intellectual property dispute with Joltid, the company from which it licences Skype’s core technology.

“If Skype was to lose the right to use the Joltid software as the result of the litigation, and if alternative software was not available, Skype would be severely and adversely affected and the continued operation of Skype’s business as currently conducted would likely not be possible,” says eBay’s quarterly report to the United States Securities and Exchange Commission. Public companies are required to submit such reports periodically to the Commission. eBay bought Skype in 2005 for US$2.6 billion.

But the deal did not include ownership rights over a core piece of technology needed to run Skype. This technology — and Skype’s right to “possess, use, or modify” certain parts of its code — are at issue in the current dispute, with Joltid arguing that Skype’s actions have violated the licensing agreement, according to the report submitted to the Commission. A trial is set for 2010.

In general, eBay said in the report it expects it “will increasingly be subject to patent infringement claims as our services expand in scope and complexity” and that “intellectual property claims, whether meritorious or not, are time consuming and costly to resolve, could require expensive changes in our methods of doing business, or could require us to enter into costly royalty or licensing agreements.”