Ebay Warns that Patent License Disagreement Could Result in Skype Shutdown

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Ebay has warned that a patent licensing disagreement could result in a shutdown of its VoIP service, Skype. The company made the warning in its Form 10-Q for the June quarter, filed with the SEC this week, and in that filing the company warned that unless a licensing disagreement was resolved, or alternatives technologies found, "the continued operation of Skype’s business as currently conducted would likely not be possible."

At issue is a licensing agreement between Ebay and Joltid Limited, the holders of this key component of what makes Skype work. When Ebay bought Skype in 2005 for some US$2.6 billion, the purchase price did not include control over this patent, but a licensing agreement was put into place between the companies.

According to Ebay's filing, Joltid became concerned when Ebay revealed details of the patented technologies in the course of litigating other patent lawsuits. That concerned led to Joltid unilaterally terminating the licensing agreement, which in turn led to Ebay filing a suit against the firm in England, where it is based.

That suit seeks to get the court to declare Skype/Ebay not to be in violation of their agreements, and to reinstate the terms of the licensing agreement as it has existed.

Ebay has also said it was working on developing alternative technologies, but promised that such efforts may come to naught, and would be expensive even if they did work.

Form 10-Q filings often include warnings of dire consequences relating to lawsuits, and it's not likely that Skype will disappear on the morrow. The story bears watching, however, for further developments.

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