Report: eBay is building a Frankenskype

eBay wants to spin off telephony service Skype into a separate publicly traded company, but something's standing in the way: Skype's founders are threatening to take back some of the technology in the midst of a licensing dispute.

The auction giant's solution, according to a Bloomberg report on Thursday: Build a new one.

This was revealed in a 10-Q regulatory filing with the Securities and Exchange Commission; eBay is not commenting beyond the filing. You can decide whether "Frankenskype" or "Skypenstein" is a better name for the hypothetical creation.

Here's what has happened: Skype's founders have established a company called Joltid Ltd., which still owns the rights to some of Skype's technology. Joltid has made the accusation that eBay doesn't have the right to do everything it wants with all of Skype's code as a result; eBay is suing Joltid to get that technology back (is this like the Silicon Valley equivalent of body-snatching?) But the catch is that the trial isn't scheduled until next June, which could put a big roadblock in the way of eBay's plans for a Skype IPO.

So that's why eBay is working on a total rebuild of Skype's software.

There is, however, this little issue. "The new software will be expensive and might not work," Bloomberg's article summarized. "The company said it might have to shut down Skype if the dispute with the founders isn't resolved."

eBay purchased Skype in 2005 for $2.6 billion, but it hasn't proven to be the best fit for the company. Rumors circulated that it was looking to sell Skype, possibly to Google, but then opted to take the company public instead.

[Josh.Lowensohn]

New feature: Abby normal call volumes.

[lang0502]

So what exactly did they get for $2.6 billion dollars if it didn't include the code? It sounds like they should ask for a refund.

[cs2cdfan]

Who negotiated this deal? I mean Ebay can not be this loose with their money, how do you not have the buyout on all assets and code for 2.6 billion?

Caroline, please update this story with some more details on how such a thing could happen.

[Absolution2009]

Yeah i'm wondering the same thing. Sounds like another greedy company trying to screw over another company to me.

[mbenedict]

My guess is eBay has a perpetual "right to use" but not "right to transfer" or something similar to that (or maybe, no "right to create derivatives".)

Meaning they have a license but don't own the actual IP.

[Bob_Taylor_ATL]

Great story Caroline! I like your twist and style. I can't quite decide whether I like the name "Skypenstein" or "FankenSkype" better (both are excellent nomers). But since it's an eBay monster, I think I'll remember it as the "HypenSkype" announcement, until they actually reveal the beast that will be offered to the general stockholding public :-) Maybe they can bring back the IPO market itself while they're at it :-)

Btw, I assume you mean blogs by or about restaurants when you mention your interest in restaurant blogs. I bet you used to brew a mean (good) cappucccino, and now know all the places to grab one on the run. Hope to read more tech and food happenings from your keen mind's eye in the future.

[tech_crazy]

Why the suck up?

[Bob_Taylor_ATL]

tech_crazy: The "suck up" as you so deftly put it, is simply appreciation for a person who discloses their background, presents the facts, and then adds an interesting point of view, to a subject of interest to my business. It's relevant and related to the reasons I find anonymous comments and commentators an annoying distraction to well written blog posts.

[krosafcheg]

I agree, I think Caroline is hot too!

[Renegade Knight]

Whoops. I hate when you buy a perfectly good company but forgot to maker sure that purchase included what you need to make it work...

[zyxxy]

They have all the code. They just don't have 'rights' to all the code. There is a huge difference.

[nemetfox]

I just hope Skype keeps running. It's been a big stress reliever when I can just call my friends and family back home any time I like, as if I was there.

[angry jubu]

Google and Skype are a much better fit. Ebay shouldn't be allowed to buy any more technology companies; they sully everything they touch.