Streamcast Claims Ownership of Core Skype Technologies
Andy has just posted the full text of the Streamcast / Skype RICO lawsuit. It’s kind of a grubby fax. Who knows where he got it from? He would only tell me "sources". Nonetheless, the suit alleges that:
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Streamcast and some of the predecessor entities to Skype had a right of first refusal agreement allowing Streamcast to purchase the peer to peer technology which is the basis of Kazaa, and which is alleged to be the basis of Skype, in the event that an offer was made by a third party.
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Streamcast was not offered this right when the technology was sold to Sharman.
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Through a series of transactions in offshore havens such as Vanuatu, the technology was illegally transferred to Skype, in breach of the original contract.
Streamcast is claiming ownership of the technology which Skype sold to EBay last year. They’re demanding the usual remedies such as injunctions and the like. And, they’re demanding a share of the $4.1 billion sale price.
Wowsers!
No doubt there will be a lot learned in discovery. The allegations, however, are stunning. The whole suit begs the question "How much, and how carefully, did EBay do their due diligence?".
Most of all, I am in awe of Andy Abramson. He told me last week that he had a big story coming. Never in my wildest dreams did I imagine that it would be this big.
Update: Andy just dropped me a piece of email at 6:31 AM Monday March 27th to say that he may not have received the final suit in his fax. So, he’s updated his posting, and taken the fax down for now. Stay tuned.
March 26th, 2006 at 11:45 pm
[...] At the core of the complaint is the FastTrack P2P technology, which went from Kazaa to Sharman and eventually ending up in Skype. StreamCast claims that it had the first dibs on this technology, which they say is part of Skype. Alec Saunders, calls the allegations stunning, and vocalizes the question that has been echoing in my mind: “The whole suit begs the question ‘How much, and how carefully, did EBay do their due diligence?’” [...]
March 27th, 2006 at 6:12 am
Interesting that NONE of this came up when Skype was not being acquired! Magically all this info comes gushing out when the big $4.1 B figure was revealed!
Yet again I have difficulty in understanding what Ebay is going to dow with Skype and to add to that is a an acquisition that has more holes then Swiss Cheese.
March 27th, 2006 at 6:24 am
Indeed, Rohit. Read Om Malik’s posting. He writes:
Earlier today, when I asked a smart attorney about the Skype-Streamcast fracas, aka the RICO suit, he said that most civil (RICO) suits are about three things – money, money, and money.
ie. while there was no money there was no point in starting a suit.
March 28th, 2006 at 1:37 am
eBay to pay music biz via Streamcast v. Skype lawsuit
Streamcast, developer of Morpheus, has sued Skype and its founders under U.S. Racketeering law, according to Andy Abramson. Mr. Wave Theory shares the beginning of the story when Streamcast hired Skype/Kazaa/Fast Track founders Niklas Zennstrom and Jan…
March 28th, 2006 at 1:50 am
A lawsuit target with deep pockets like eBay is a slam dunk for Michael Weiss … assuming the suit has some merit. Not that that’s required. Another motivation – Streamcast has been seeking its next round of funding for a legal P2P network. Perhaps the VC reception was so chilly it forced Streamcast to make this desperate play.
Given that Streamcast will settle with RIAA, the $2 billion question is how much of the eBay settlement does RIAA get?
Now let’s go full circle. Tie this into the rumored eBay Music Store. That’s expensive music. Thousand dollar songs, anyone?
http://www.p2p-weblog.com/50226711/ebay_to_pay_music_biz_via_streamcast_v_skype_lawsuit.php
March 28th, 2006 at 3:46 am
hmm quite interesting to see how ebay plans to integrate skype into its community ….
March 28th, 2006 at 11:34 am
[...] Internet telephony company Skype is being sued by the makers of Morpheus file-sharing software, StreamCast Networks, claiming that Skype is using peer-to-peer technology that StreamCast contends it owns. If the allegations are valid, the lawsuit could pose a big threat to Skype, which was acquired by eBay for $2.6 billion in 2005. Skype uses peer-to-peer technology to efficiently connect users over the internet to transmit calls. [...]
March 28th, 2006 at 12:30 pm
It would be of interest to know how much of Fastrack P2P technologies is built into the core of Skype and more so how much of it was developed by the Morpheus team…. all the more reason now in light of the lawsuit.
March 28th, 2006 at 12:43 pm
Vijay, my understanding from reading the suit (which is now offline, so unfortunately you can’t read it yourself) is that the allegation is that KaZaa failed to honour the terms of the original right of first refusal agreement. Who knows how valid this is without seeing the original license agreement.
March 28th, 2006 at 3:21 pm
If this is true, could it invalidate the purchase of Skype? Could eBay get an out, forcing those who were paid to hand back the money?
March 28th, 2006 at 7:56 pm
I don’t believe it will come to that. I think this is a shakedown.
March 29th, 2006 at 1:53 pm
[...] Alec Saunders says with reference to the Streamcast / Skype RICO lawsuit that “my understanding from reading the suit is that the allegation is that KaZaa failed to honour the terms of the original right of first refusal agreement. Who knows how valid this is without seeing the original license agreement”. An opinion shared by Om Malik who indicates that “I am amazed at all the murky stuff that went off but then when you are skrirting the law, as kazaa et.al were, this kind of ‘gray’ activity is expected”. With all the high drama in store it would be nice to know Sharman Network’s take on this. [...]
May 24th, 2006 at 9:33 am
[...] Streamcast filed an updated complaint Monday morning, in their ongoing suit against Skype and 21 other companies. Andy Abramson first reported on this last March, and I wrote a summary of the suit at the time, from the faxed copy which Andy had uncovered. Monday’s update: [...]
January 25th, 2007 at 6:00 pm
[...] One of the more lurid stories of the VoIP business came to a close today, as U.S. District Court Judge Florence-Marie Cooper dismissed the $4.1 billion antitrust lawsuit filed by StreamCast Networks against VoIP service provider Skype, eBay and more than a dozen defendants. It certainly made for great reading with allegations of racketeering, antitrust and all the imagery that goes along with. It even had an intrepid sleuth in Andy Abramson, digging through court filings to grab a copy of the suit before the news broke. [...]