From eBay's SEC filing of form 10Q:
Skype licenses peer-to-peer communication technology from Joltid Limited pursuant to a license agreement between the parties.
That's the software that lets your Skype client find and talk with other Skype clients. Joltid Limited is a British Virgin Islands company.
The parties had been discussing a dispute over the license.
Skype's founders want a second payday. They flubbed their $2 billion dollar payout at eBay, missing targets, settling for a nine figure buyout.
In March 2009, Skype Technologies S.A. filed a claim in the English High Court of Justice (No. HC09C00756) against Joltid Limited.
Skype picked the venue.
Following the filing of the claim, Joltid purported to terminate the license agreement between the parties.
"We're ending your license." "You're just purporting to end our license."
In particular, Joltid has alleged that Skype should not possess, use or modify certain software source code
Presumably, someone at Joltid provided that source code to Skype. Their contract (not yet public) may have detailed how that code was to be used. Or not.
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.
Since this is about facts, discovery should be interesting.
From an earlier SEC filing:
In particular, Joltid has alleged that Skype should not possess, use or modify certain software code (the "Code") and that, by doing so, and by disclosing the Code in certain U.S. patent cases, pursuant to orders from U.S. courts, it has breached the license agreement.
On the basis of, among other things, the parties' mutual dealings since the execution of the licence agreement, Skype is asking the English High Court for declaratory relief, including findings that:
(i) Skype is lawfully accessing, in possession of, using and modifying the Code so that Skype is not in breach of the license agreement with Joltid and accordingly Joltid's notice of breach and subsequent notice of termination are invalid;
(ii) Skype lawfully disclosed the Code in the U.S. patent cases so that Skype is not in breach of the license agreement with Joltid and accordingly Joltid's notice of breach and subsequent notice of termination are invalid; and
(iii) Joltid has certain indemnity obligations in relation to the U.S. patent proceedings.
Skype sued first, to finalize Joltiid's claims. Skype is asking the court to rule Skype didn't breach the contract and the contract is still in effect.
So, of course, Joltid sues back...
Joltid has brought a counterclaim alleging that Skype has repudiated the license agreement, infringed Joltid’s copyright and misused confidential information.
If Joltid wins on copyright infringement, Skype users downloaded the software more than 1.5 billion times. Is Joltid the new RIAA?
On the basis of, among other things, the parties’ mutual dealings since the execution of the license agreement, Skype asked the English High Court for declaratory relief, including findings that Skype is not in breach of the license agreement, that Joltid’s notice of breach and subsequent notice of termination are invalid, and that Joltid has certain indemnity obligations in relation to the U.S. patent proceedings.
"Dear Judge, shut up Joltid."
Trial is currently scheduled for June 2010.
A deadline!
Although Skype is confident of its legal position, as with any litigation, there is the possibility of an adverse result if the matter is not resolved through negotiation.
It's to Skype's advantage to strike a deal with Joltid as soon as possible. Joltid, however, may enjoy a better bargaining position the closer they get to the court date.
Skype has begun to develop alternative software to that licensed through Joltid.
When did this project begin? While the Joltid founders were still running Skype for eBay? Five minutes after the founders left? When Joltid claimed breach?
Skype can improve their bargaining position by replacing the Joltid p2p engine. They could buy the technology from Bluemoon.
This is an opportunity to improve on the original p2p engine. Skype could build a p2p engine that:
- scales faster and more reliably,
- crosses more residential and enterprise firewalls,
- works at low power on wireless networks,
- survives hostile conditions including blocking,
- updates status and presence more quickly,
- recovers more quickly from disruptions in the p2p fabric,
- efficiently creates creates supernodes and relays.
Skype's new CTO has one year to design, test, and deploy a new p2p engine assuming they started construction in 2009q2 (would eBay have reported it if they'd started sooner?). That's a tight deadline when p2p isn't at the center of your expertise.
However, such software development may not be successful, may result in loss of functionality or customers even if successful, and will in any event be expensive.
No pressure.
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.
Where's that countdown clock? 305 days to go.
See also:
Hat tip to the Skype 5.x chat room.
Labels: developers, intellectualproperty, news, niklaszennstrom, skype, software, strategy, technology, uk
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