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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:

  1. 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.
  2. Streamcast was not offered this right when the technology was sold to Sharman.
  3. 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.


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. 

{ 8 comments… add one }

  • Rohit March 27, 2006, 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.

  • Alec March 27, 2006, 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.

  • Jassim March 27, 2006, 11:46 pm

    hmm quite interesting to see how ebay plans to integrate skype into its community ….

  • Marc Freedman March 28, 2006, 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?


  • Alec March 28, 2006, 8:43 am

    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.

  • Vijay Krishna March 28, 2006, 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.

  • Alex Goldman March 28, 2006, 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?

  • Alec March 28, 2006, 7:56 pm

    I don’t believe it will come to that. I think this is a shakedown.

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