Skype racketeering case dismissed

But Steamcast vows to continue litigation

By Andrew Orlowski • Get more from this author

Posted in VoIP, 24th January 2007 12:30 GMT

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One of the longest running feuds in the P2P business has taken a new turn after a judge dismissed a racketeering case brought by Streamcast Networks against Skype.

Streamcast, which develops the Morpheus P2P software, has long maintained that it had rights to the FastTrack/Kazaa P2P software engine on which Morpheus is based. FastTrack was created by a number of developers, including the two founders of Skype, who Streamcast says illegally transferred the technology to Sharman Networks in 2002.

Streamcast filed suit against a number of parties, including Skype founders Niklas Zennstrom and Janus Friis, Sharman Networks, Joltid (developers of FastTrack/Kazaa), and others under the RICO Act in January last year.

The suit claimed that Zennstrom and Friis also developed Skype's VoIP technology for Streamcast and took it with them, illegally profiting from its use.

A Federal Judge in Los Angeles has decreed that Streamcast failed to prove its case and dismissed all claims against Skype and the other defendents.

The feud dates back to the turn of the decade, when in a bid to evade lawsuits from the RIAA and MPAA, P2P operators took their companies offshore, making an assessment of the true ownership of the assets difficult. Sharman Networks was created in Australia in 2001 to acquire Kazaa. Months later, Sharman blocked Streamcast from using Kazaa, hitting the latter's Morpheus network.

In 2005, Skype was acquired by eBay for $2.6bn. The same year the Supreme Court made an ambiguous ruling in MGM vs Grokster that prompted a number of P2P companies to close down and make peace with the litigants, the RIAA and the MPAA. Streamcast has developed a new network for "authorised content", but continued to defend the legality of Morpheus for another year, until last September.

Proving a case under RICO is difficult, as it requires the plaintiff to prove "a crime within a crime". The act was introduced to combat Mafia racketeering and extortion, and is typically successful in cases involving violence.

Nevertheless, Streamcast has vowed to continue its ligitation. ®

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