RealTime IT News

Skype, Kazaa Named in $4B Lawsuit

StreamCast Networks, maker of the Morpheus file-swapping software, filed charges against the founders of Skype and developers of Kazaa, alleging the defendants engaged in numerous violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act.

The company also claims it owns the software used by the peer-to-peer Internet phone service.

StreamCast is asking a jury in the U.S. District Court in the Central District of California to award the company $4.1 billion in damages and to make Skype founders Niklas Zennstrom and Janus Friis turn over their profits from the $2.6 billion sale of the peer-to-peer VoIP company to EBay.

EBay is not named among the defendants, which include Kazaa's new owner, Sharman Networks.

Skype, Kazaa and several other defendants, "orchestrated an elaborate overseas shell game in an attempt to steal and wrongfully profit from technology that rightfully belongs to StreamCast," according to the court papers obtained by internetnews.com.

Before forming Skype, Zennstrom and Friis developed Kazaa, file-exchange software that competed with StreamCast's Morpheus. After a dispute over licensing the underlying FastTrack software, Morpheus shut down and Kazaa was sold to Sharman Networks.

The FastTrack software was sold to Sharman even though Kazaa had agreed earlier StreamCast would get the first chance to buy the technology, according to court papers.

StreamCast charges the Kazaa developers and others used a Trojan horse to turn off access to FastTrack and "funneled" 28 million Morpheus users to Kazaa/Sharman.

Sharman could not be reached for comment. And according to a Skype spokesperson, the company "does not comment on pending or ongoing litigation."

First filed Jan. 20, the case was reassigned earlier this month to U.S. District Court Judge Steven V. Wilson who presided over MGM Studios v. Grokster.

That case eventually reached the U.S. Supreme Court, which ruled against Grokster and StreamCast. James Baker, the lead attorney for StreamCast in that case, is heading up the lawsuit against Skype and Kazaa.

Beyond confirming a lawsuit had been filed, Baker told internetnews.com that StreamCast intends a vigorous case.