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eBay, Skype Settle IP Suits with Joltid, sans Index Ventures
By: Clint Boulton
2009-11-06
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eBay settles lawsuits with Joltid and Joost in a $1.9 billion deal that gives Skype ownership over all software previously licensed from Joltid and paves the way for a group of investors to acquire the majority of the company. Joltid and Skype founders Niklas Zennström and Janus Friis, who had earlier tried to buy Skype back from eBay, will join the investor group, contributing Joltid software and making a capital investment in exchange for a 14 percent stake in Skype. Silver Lake and fellow investors Andreessen Horowitz and the Canada Pension Plan Investment Board will grab 56 percent of Skype, with eBay retaining the remaining 30 percent.
The future of voice-over-IP service Skype looks bright again for its morethan 500 million users.
eBay Nov. 6 said it has settled lawsuits with Joltid andJoost in a $1.9 billion deal that gives Skype ownership over all softwarepreviously licensed from Joltid and paves the way for a group of investors toacquire the majority of the company.
On Sept. 1, eBay agreed to sell 65 percent of Skype to an investor group,led by Silver Lake Partners and including Index Partners and AndreessenHorowitz, Marc Andreessen's venture capital company.
Skype Founders Niklas Zennström and Janus Friis, through their newpeer-to-peer company Joltid, sued Skype, eBay and the would-be investors forcopyright infringement in Californiadistrict court Sept. 16.
One month later, they teamed with Web video startup Joost to sue to blockIndex Ventures and former Joost CEO MikeVolpi from participating in the deal. Joltid and Joost alleged that Volpi usedconfidential information in forging the deal.
Zennström and Friis emerged victorious in this settlement agreement Nov. 6,while Index Ventures was forced out. Joltid, Zennström and Friis, who hadearlier tried to buy Skype back from eBay, will join the investor group,contributing Joltid software and making a "significant capitalinvestment" in exchange for a 14 percent stake in Skype.
Silver Lakeand fellow investors Andreessen Horowitz and the Canada Pension Plan InvestmentBoard will grab 56 percent of Skype, with eBay retaining the remaining 30percent.
Pursuant to the original financial terms, which valued Skype at $2.75billion, eBay will receive $1.9 billion in cash upon the completion of the saleand a note from the buyer in the principal amount of $125 million.
The parties expect the deal to close in the fourth quarter.
Commenting about being left out of the marriage, Index Ventures partnerDanny Rimer said, "The deal terms changed for Index such that it no longermatches our investment criteria, and thus we have decided not to participate inthe transaction."
While this saga had all of the makings of a grudge match between Zennström and Friis and Volpi, the man theylured from Cisco Systems to run Joost, Joltid and Skype were previously embroiled in an intellectual property licensing struggle.
eBay licenses P2P software from Joltid called the Global Index, whichenables Skype to let users make voice calls from their computers to othercomputers and land-line and mobile phones. In March, Skype and Joltid sued each other over Skype's right to use thetechnology. Joltid alleged that Skype not only unlawfully modified its Global Indexsource code but made it available to third parties.
Today's settlement brings closure to those disputes as well. BernsteinResearch analyst Jeffrey Lindsay noted:
"This is consistent with ourprevious expectations, as Joltid's motivations appeared to be centered onextracting additional value for itself (either through a settlement or byknocking down Skype's valuation so it could put in its own bid)."
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