Skype's legal storm clears up

Skype's cofounders have dropped their legal challenges against eBay and Skype's future majority owners

The legal war over Skype has ended.

Skype's cofounders, Janus Friis and Niklas Zennstrom, have agreed to transfer ownership of the remaining Skype technology that eBay didn't own, paving the way for eBay to complete its sale of a majority stake in Skype to an investor consortium.

In exchange, Friis and Zennstrom will join the investor consortium and obtain a 14 percent stake in Skype. The other consortium partners, led by Silver Lake, will own a 56 percent stake in Skype, and eBay will hold on to 30 percent, eBay said Friday.

The agreement also calls for the consortium to shed one of its original partners, Index Ventures, against which Friis and Zennstrom had additional legal claims.

The top financial details of the transaction remain unchanged: eBay will get US$1.9 billion in cash and receive a note in the principal amount of $125 million from the buyers, which also include Andreessen Horowitz and the Canada Pension Plan Investment Board.

The deal, which isn't subject to financing conditions and is expected to close in this year's fourth quarter, puts Skype's value at $2.75 billion.

Through their companies Joltid and Joost, the Skype cofounders had been waging legal battles in the U.S. and the U.K. against eBay and the investor consortium.

At issue was a key peer-to-peer technology that wasn't included in their $2.6 billion sale of Skype to eBay in 2005. Instead, eBay licensed the technology, which is essential to Skype.

However, a disagreement with eBay over the licensing terms led Friis and Zennstrom to withdraw eBay's permission to use the technology earlier this year, prompting a legal tussle in the U.K.

The situation became more acrimonious when eBay announced in September its intention to sell the Skype majority stake. Soon after, Joltid, the entity that owned the Skype P2P technology, sued eBay and the consortium partners in the U.S. for copyright infringement.

Separately, Joltid and Joost also sued in the U.S. former Joost CEO Michaelangelo Volpi and his new employer, Index Ventures, making allegations that included breach of fiduciary duty and misappropriation of trade secrets. As part of the agreement announced Friday, Index Ventures will exit the consortium.

"We are very pleased to have the litigation resolved. We remain confident in a great future for Skype, and we look forward to working with Niklas, Janus and the other investors as partners to help the company achieve its full potential," said Silver Lake Managing Director Egon Durban in a statement on Friday.

In April, eBay said it planned to spin off Skype because Skype, an Internet telephony, video conferencing and instant messaging provider, no longer fit in with eBay's core businesses: its online marketplace and PayPal payment division.

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