The recent Skype / eBay story around ownership flags up all sorts of things in what we see in our line of work around IP strategy: IP ownership issues as a rule are always present, and can be very, very costly to fix (but very cheap to fix if caught early).
A short Timeline
2002 – Skype founded by Kazaa creators
2003 – initial release of Skype
2005 – eBay buys Skype in a $2.6bn deal (totaling 3.1bn through to today)
2009 – eBay announces that Skype will IPO and be valued at over $2bn. Joltid, a company set up by Skype founders claims that eBay/Skype only has a license to a core technology used by Skype to work. eBay must pay money for a continuing license or face rewriting its core code while keeping its millions of users happy (no small task).
Skype has 480 million registered users its revenues in the last quarter were $170m. eBay was thought to be able to use Skype to produce gains with its auction site on high end items, but any added benefits to the eBay site have not materialized.
The Guardian states that the Joltid/eBay dispute is driven by Niklas Zennström – one of Skype’s creators and owner of Joltid – as a negotiation strategy in an effort to buy the company back.
Skype’s founders and key developers know p2p. They helped develop Kazaa before tackling VoIP with Skype and then went on to found Joost. The core piece of code at stake between Skype and Joltid is a product called Global Index:
Global Index™. Global Index is the world’s most technologically advanced, scalable and field-tested peer-to-peer technology. Global Index creates a self-organizing and self-healing distributed storage, transport and data object management system that does away with the costs of traditional datacenter solutions and enables a range of applications from communications to broadcasting and beyond.
The biggest implementation of Global Index to date has been Skype where Global Index enables peer-to-peer voice, video and chat communications.
They are also patent holders as well:
Joltid also holds a comprehensive portfolio of intellectual property including US patent 7,480,658, covering distributed database systems and co-ordinated decentralized peer-to-peer computing.
I did a quick search of esp@cenet and the USPTO website (including assignments database) but only found one Joltid patent, which is the 7,480,658 patent mentioned above. It was granted in January of 2009, and if that’s the core of their litigation on the patent side of things, they should hope it’s a good one.
Joltid claim that they only licensed their technology to Skype, and that the license has terminated. This means that eBay paid billions for Skype without sorting out the licensing issues or having any sort of strategy around re-writing the core Skype code. The funny thing is that this is not the first time that there has been an ownership dispute over this same technology.
The end result is that eBay is stuck litigating in the English courts while it scrambles around for a solution to this ownership problem. It is much like facing down a patent troll or a competitor when going to IPO. The immediate parallel that comes to mind is Wolfson.
Edinburgh based Wolfson Electronics was set to go for IPO in 2003 in the middle of a down market for tech stocks. The previous year it posted £20.2m in turnover, with £2.4m coming from the US and expected to float for £213 million. Only days before Wolfson prepared to go public with its CEO book-building across Europe, Wolfson’s competitor in the US, Cirrus Logic, files a patent infringement suit. The suit delays the IPO, but only slightly as a result of a quick response and a clear presentation of the IP risks by Wolfson. They achieve a high price despite a tough climate for tech stocks.
It seems to me that even if eBay found out they made a mistake after their initial purchase of Skype by not securing a formal license and ownership of the relevant IP, they should have at least been planning quite heavily for a dispute later on, particularly at IPO. Like Wolfson, they should have had an answer waiting.