eBay could have just pulled the biggest FAIL of the year

Four years ago, Swiss venture capital firm Index Ventures became one of the first backers of Skype. Now, just two weeks after Index and a group of private investors agreed to buy 65% of the Internet calling service from eBay, the VC firm has been drawn into a messy legal battle with Skype’s founders.

In a lawsuit filed Wednesday in California court, entrepreneurs Niklas Zennström and Janus Friis allege eBay and Skype’s new investors are in violation of copyright law and seek damages that could total more than $75 million for each day they operate Skype. Experts say the suit could delay eBay from closing the $1.9 billion sale – which still awaits regulatory approval – or scare off Skype’s new investors altogether.

Allegations from Zennström and Friis have been a monkey on eBay’s back ever since March, when the pair’s company Joltid filed a lawsuit that would prevent eBay from using the core technology that makes the Internet calling service work, and which eBay had been licensing from Joltid since purchasing Skype in 2005. That lawsuit is scheduled for trial next year in a British court. “The first suit said ‘every time somebody downloads the Skype program, you are stepping on our intellectual property.’ Now they are saying ‘we’re going to charge you for it,’” says Randy Katz, partner of law firm Baker Hostetler, which is not affiliated with any of the plaintiffs or defendants.

In addition to those two businesses, it owns Skype, which has no strategic or tactical relationship with the other two divisions. According to eBay's 10-K, its 'communications division', which is how it refers to Skype, brought in $381 million last year. eBay's entire revenue was $7.7 billion. It also reported that the cumulative number of Skype registered users increased to 405.3 million at 31 December 2008 from 276.3 million on 31 December 2007. That makes the revenue yield of each user remarkably small.