Zennström and Friis founded the internet telephony company in
2003 and in 2005 sold it to internet auction firm eBay, which
announced this year that it wanted to sell the company.
Zennström and Friis attempted to buy it back but another buyer
was found, the Silver Lake Investors Group. Zennström and Friis
sued eBay in the US claiming that Skype's use of their company
Joltid's software source code within Skype was a breach of
copyright. They claimed that Skype had permission to use only a
different form of the software.
It had attempted to terminate the agreement for the software's
use earlier in the year on the same basis, resulting in a court
case in England.
EBay's purchase agreement of Skype, which contained the software
agreement, had specified that any disputes should be handled by the
English court system. Joltid's copyright suit, though, was filed in
California.
The High Court said on 6th November that the dispute resolution
clause must stand and that the issue must be settled in the English
courts. On the same day, eBay and Zennström and Friis announced
that they had settled their dispute out of court.
That deal gave the pair a 14% holding in Skype in return for a
cash investment and the right to use the Joltid source code.
Mr Justice Lewison said in his High Court ruling that Joltid's
claims in its US copyright infringement case fell within the scope
of clause 19.1 of the agreement.
That clause said: "Any claim arising under or relating to this
Agreement shall be governed by the internal substantive laws of
England and Wales and the parties submit to the exclusive
jurisdiction of the English courts".
It is possible for companies to argue about what country's
jurisdiction governs an issue by arguing that a jurisdiction is the
wrong forum, or a 'forum non conveniens'.
Mr Justice Lewison said, though, that Joltid could not make that
argument when a specific clause had been agreed indicating where
disputes should be resolved.
"What one might call the standard considerations that arise in
arguments about forum non conveniens should be given little weight
in the face of an exclusive jurisdiction clause where the parties
have chosen the courts of a neutral territory in the context of an
agreement with world-wide application," he said. "Otherwise the
exclusive jurisdiction clause would be deprived of its intended
effect."
The judge said that the fact that neither company had
significant operations in the UK strengthened, rather than
weakened, the clause.
"The strength of the exclusive jurisdiction clause in the
present case is reinforced by a number of considerations
[including] … neither Skype Technologies not Joltid has any obvious
connection with England and Wales. Consequently they must be taken
to have deliberately chosen a neutral forum for the determination
of their disputes," he said. "The licence to use the software was a
world-wide licence. Consequently the parties must be taken to have
contemplated that a breach of the terms of the licence might take
place anywhere in the world, yet they still chose to have their
disputes decided in England and Wales. A breach of the terms of the
licence might well involve the infringement of local copyright law
in a foreign jurisdiction, yet the dispute was to be determined in
England and Wales."
Joltid argued that the activities covered by the agreement
largely took place in the US and that
therefore the court case should take place there, but Mr Justice
Lewison disagreed.
"All of these factors were eminently foreseeable when Skype
Technologies and Joltid agreed the exclusive jurisdiction clause,"
he said. "They are no more than the standard considerations that
arise in arguments about forum non conveniens. In my judgment they
do not (whether individually or collectively) amount to a strong
reason for refusing to enforce the exclusive jurisdiction clause by
injunction."
In a bid to convince the High Court to allow it to continue with
its US proceedings Joltid offered a number of 'undertakings',
promising to be bound by certain court rulings and not to take
action in relation to some activities.
Mr Justice Lewison rejected those as factors in his decision.
"In my judgment these undertakings are no more than an attempt by
Joltid to wriggle out of its contract," he said. "I do not consider
that they should tip the balance against the grant of an anti-suit
injunction."
The Court granted the anti-suit injunction against Joltid's US
action. On the same day, the deal with eBay was announced.
"As part of the settlement agreement, Joltid and Skype founders
Niklas Zennström and Janus Friis will join the investor group,
contributing Joltid software and making a significant capital
investment in exchange for a 14 percent stake in Skype," said a
Skype statement of 6 November.
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