IP Democracy: Is eBay in for a World of Pain? Probably Not.

For those of you have been out of it today, the biggest news in the blogosphere is that Skype, which eBay bought for a cool $2.6 billion, and its co-founders Niklas Zennstrom and Janus Friis, are being sued by Streamcast Networks, maker of P2P software technology Morpheus. (Hats off to Andy Abramson for this scoop.) Although there’s a lot to this suit (Techdirt has a pretty good explanation), it seems to boil down to the fact that Streamcast is ticked off that the Skype founders, who also founded P2P network Kazaa, didn’t give it right of first refusal on the Kazaa technology before spinning that technology off to Sharman Networks.

Somehow Streamcast is suing Skype under RICO or racketeering laws, presumably because the ownership of the original Kazaa technology was complex to the point that Streamcast is claiming that Skype created some sort of confusing ownership shell game, or fraud, in cheating Streamcast out of what it argues was its right of first refusal on the technology.

Will this development knock eBay back on its heels? Probably not. For one thing, it isn’t clear that the technology in question is actually used in Skype’s VoIP service, although several reports suggest that it is. For another, from the sounds of its, Streamcast may be just looking for a way to make a buck from the new, well-heeled owner of Skype — the company has previously and unsuccessfully pressed claims against Skype.

Finally, the market doesn’t seem to care much about the long-term prospects of this litigation, and investors are typically overly sensitive about this kind of legal threat. As of 3:33 ET, eBay’s stock was actually up by $.02/share at $37.32.

But, so much is unknown at this point — it isn’t even clear that Andy got a hold of the final suit filed against Skype.

Posted by Cynthia Brumfield on March 27, 2006 3:04 PM to IP Democracy