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Skype founders escalate legal battle over sale

The founders of the Internet calling service Skype appear to be scorching the earth in an effort to scuttle eBay’s sale of the service. On Friday, they filed another lawsuit related to the sale.

Niklas Zennstrom and Janus Friis, both Danish programmers, sold Skype to eBay for more than US$2 billion in 2005, though they kept the ownership of the peer-to-peer software at its heart. They then licensed that technology back to eBay and, later, to Joost, an Internet video service they created in 2007 and still own.

Last week, Joost said that it had removed its former chief executive, Michelangelo Volpi, from its board and had begun an investigation of his conduct. Volpi put together the group of private equity and venture capital funds that agreed this month to buy 65 percent of Skype from eBay for US$1.9 billion.

On Friday, Joost sued Volpi and his investment firm, Index Ventures. The lawsuit, filed in Delaware state court, asserts that he misused confidential technical information about Skype and Joost to try to persuade investors that he could sidestep a dispute over Skype’s use of the software owned by the founders.

The complaint says that “sophisticated parties,” including Microsoft and Google, considered buying Skype from eBay but “could not get comfortable proceeding with formal bids” because of the legal issues involved.

The Skype founders filed two previous lawsuits. Two days ago, Joltid, another firm they own, sued eBay and the Skype buyers in US District Court of Northern California in San Francisco over copyright infringement of the peer-to-peer software.

In March, Joltid filed a similar lawsuit in Britain asking a court to force Skype to close. That case is scheduled for trial next year.

The complaint filed in Delaware said Joost had been trying to merge with Skype through an acquisition of Skype from eBay. This year, Zennstrom and Friis unsuccessfully tried to buy Skype back.

The successful group, led by Silver Lake Partners and Volpi’s Index Ventures, beat out a rival group lead by Elevation Partners, another Silicon Valley private equity fund.

“Janus and Niklas are pulling out every stop they can in the hope that they can pry the Skype sale out of Silver Lake’s paws and back into their own,” said Randy Katz, a partner with the law firm Baker Hostetler, who is not directly involved in the litigation.

Zennstrom and Friis founded Skype in 2002.

A person briefed on the Skype sale process said that as part of the sale, Skype’s founders were offered “hundreds of millions” in Skype common stock but they declined the offer.

“This is emotional,” the person said. “This is, ‘You stole my baby.’”

“They have staying power. They know how the legal system works and they are not wimps,” the person said.
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