Popular voice-over-IP service Skype may be forced to shut down because of a licensing dispute with the company’s founders, the company’s parent company eBay has revealed.
The shock announcement, contained in a report filed with the US Securities and Exchange Commission, refers to the licensing of Skype’s operating technology licensed from the original entrepreneurs who created the service.
eBay purchased Skype from Niklas Zennstrom and Janus Friis for $US2.6 billion in 2005, but the deal did not include the technology that Skype needs to operate.
The online auction house has since licensed the technology from the entrepreneurs’ new company, Joltid, which creates peer-to-peer technology, but the two have now pulled the licensing agreement. The case is currently set to appear before the English High Court of Justice.
eBay shocked analysts when it said in its report that if the case is lost and it loses the ability to use Skype’s technology, then it will most likely be forced to shut the service down, abandoning 40 million active users worldwide.
“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,” it said.
The company also said it was researching “alternative software” to the software used in the licensing agreement, but admitted that this “may not be successful, may result in loss of functionality or customers even if successful, and will in any event be expensive”.
If eBay loses the case, which is set to appear before the court in June next year, it will be a massive hit to the company. It planned to spin Skype off in an initial public offering next year, with some analysts valuing the company at over $1 billion.
But the company has said it still intends to separate the company, despite the pending legal battle. “Our plans to separate Skype have not changed,” the company said in a statement, but made no further comment.
Skype is now the leading VoIP, with millions of account holders worldwide using the program to make international calls for free to other Skype users, and to non-Skype users for relatively small charges compared to traditional telcos.
Skype software also appears on mobile handsets and other hardware, with a Skype iPhone app recording about one million downloads less than three days after its release.
According to recent market research, Skype accounts for about 8% of all international voice traffic.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
