EBay is working on software to replace the guts of Skype but is worried that it may not succeed, may lose a court battle with Skype’s founders over rights to the core technology and may need to do something drastic some time over the next few years. The company said in a regulatory filing yesterday that if the company fails in both the legal and technical avenues it’s pursuing then “continued operation of Skype’s business as currently conducted would likely not be possible.”
Joltid, a company owned by Skype’s founders, merely licensed some of the system’s core technolgy to eBay when it sold Skype to the auction giant in 2005. Joltid now says that the license has been revoked and eBay is infringing on its rights by continuing to use the technology. The case is scheduled to go to court in June of 2010 but eBay is trying to replace the technology in the mean time. It may not succeed.
Joseph Galante at Bloomberg News cites Jayanth Angl, an analyst at Info-Tech Research Group, who argues that replacing the technology will not be easy. “It would be quite difficult to replace what they already have as the underlying component to their service,” Angl told Bloomberg. “There are a number of barriers to that, not the least of which are legal barriers.” The creation of another global P2P VOIP and video network that doesn’t infringe on existing patents is no small task.
Skype is one of the shiniest stars in eBay’s portfolio of companies and is aimed to spin out as an independent company that can sell its own stock in an IPO sometime soon. That’s unlikely to happen until this most important of several lawsuits the company faces is somehow resolved.
This Spring we reported that Skype’s founders were also interested in raising enough capital to buy Skype back from eBay. It’s been three months since that news was first disclosed and there have been no updates on the effort that we’re aware of.
Skype continues to grow very quickly. Now with 480 million users around the world, it is twice the size of Facebook and adding users almost as fast. Skype’s being gutted would cause substantial disruption to the communication of millions of families around the world.
It sounds menacing, but I don't think Skype will be closed. What do you think about it?