StreamCast Networks, creator of the Morpheus file-swapping software, has filed a lawsuit naming Kazaa and Skype Technologies, among others, as defendants
Racketeering charges have been filed against founders of Skype and developers of Kazaa by StreamCast Networks, maker of the Morpheus file-swapping software. Alleging that the defendants committed numerous violations of the Racketeer Influences and Corrupt Organizations (RICO) Act, StreamCast also claims that it owns the software used by the peer-to-peer Internet phone service.
The suit, filed in U.S. District Court in the Central District of California, claims that StreamCast owns the technology underlying Internet-calling provider Skype’s software. The lawsuit claims that peer-to-peer client maker Kazaa B.V., also founded by Skype founders Niklas Zennstrom and Janus Friis, violated StreamCast’s exclusive rights to the peer-to-peer technology behind Kazaa, known as FastTrack P2P, by selling it to a shell company. StreamCast and Kazaa have argued in the past over software licensing fees.
We have filed a suit alleging RICO and other claims, and we intend to litigate it aggressively. At this time, we have no other comments, James Baker, the lead plaintiff attorney representing StreamCast, told CNET News.com.
The jury in the US District Court in the Central District of California is being asked to award a sizable sum to StreamCast. The company is seeking $4.1 billion in damages as well as the profits from the $2.6 billion sale of Skype to eBay.
While eBay is not named in the suit, Skype founders Niklas Zennstrom and Janus Friis as well as Kazaa’s new owner, Sharman Networks, are all defendants in the case.
Court papers allege that Skype, Kazaa and several other defendants devised a complex overseas shell game in order to steal and wrongfully profit from technology that rightfully belongs to StreamCast.
While the full complaint has not been made available on the court’s Web site, Skype and Kazaa are respectively named first and fourth as defendants in the case, indicating they have a significant role in the suit.
Skype comes into the picture in a more indirect route. The suit says Skype uses FastTrack technology to transfer calls across the Internet and notes Zennstrom and Friis have "profited handsomely" from Skype’s $4.1 billion sale to eBay.
StreamCast says its network and business was irreparably harmed. The plaintiff says that since Skype uses FastTrack or strongly derivative technology, StreamCast should get all proceeds from the eBay-Skype deal and gain control of FastTrack. Damages also are being sought from the other defendants, though Skype clearly has the most money at stake. Skype said it had no comment on ongoing litigation.
StreamCast’s dispute with Zennstrom and Friis extends back to at least March 2002. Zennstrom blocked StreamCast from an upgraded version of FastTrack after what he said were billing problems. Morpheus was largely temporarily shut down as a result and Kazaa soon after offered a software migration tool for users to switch from Morpheus to Kazaa.
The allegations made by StreamCast make for a strong case. However, the history between StreamCast and Zennstrom may not play in the company’s favor. Add to that the amount of money being sought and the company may have a tougher case to prove than it at first appears. Fortunately, we can leave that for the jury to decide.
A representative for Skype declined to comment on the case. eBay, which acquired the Luxembourg-based company for $2.5 billion in October 2005, was not named in the suit, and the company could not be reached for comment. Representatives from Kazaa, or its owners Sharman Networks, could not be reached.
Baker said the case has recently been reassigned to U.S. District Court Judge Steven V. Wilson. Wilson is the same judge who presided over the MGM Studios vs. Grokster case concerning peer-to-peer technology that ultimately went to the Supreme Court. Baker went before Wilson in that landmark case as the lead defense counsel for StreamCast.
Other plaintiffs in the StreamCast case include Joltid, Joltid Ou Blastoise, Bluemoon, LA Galiote, Indigo Investment, Brilliant Digital Entertainment, Sharman Networks, Altnet CEO Kevin Bermeister and several "John Does."
Damages are being sought from the other defendants, however, Skype clearly stands to loose the most money.