Is This the End for Skype?

eBay facing court battle with Skype founders

Skype might have to shut down due to a dispute over the core technology used to make the internet telephone system work.

eBay, which paid $2.6 billion (£1.6 billion) for the system in 2005, is facing a court battle with the original founders of the company who still hold the rights to the system’s technology.

The dispute started after Skype filed a claim against Swedish company Joltid, which is controlled by Skype co-founders Niklas Zennstrom and Janus Friis, after Joltid alleged that Skype should not possess, use or modify certain software source coding. By doing so and by disclosing such codes in various US patents, Skype have allegedly broken the license agreement.

According to The Times, eBay admitted in a regulatory filing that it might have to close down the company. It said it was “trying to develop alternative software” but if that did not work, or if eBay lost the right to the original software, Skype would be “severely and adversely affected and the continued operation of Skype’s business as currently conducted would likely not be possible.”

Speaking anonymously to the newspaper, an eBay source admitted that the replacement software they are working on has no guarantee of success.

“Although Skype is confident of its legal position… Skype has begun to develop alternative software to that licensed through Joltid. 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,” the source said.

The dispute also threatens eBay’s plan to spin off Skype into a full-blown voice network and service provider, which is scheduled for next year.