Skype: The Growing Market Value of Intellectual Property Is Confirmed - Twice In Two Years

Whether the acquisition of Skype by Microsoft adds strategic and financial value to MSFT, it has confirmed the rising market value for intellectual property.

The implication for entrepreneurs and corporate executives is that the value of patents, copyrights, licenses and trademarks is becoming less of a mystery and more of a mainstream transactional negotiation. Welcome to the dawning of an intangible era.

Joff Wild comments in IAM:

"Who remembers the dispute between Joltid and Skype that erupted a couple of years back? Joltid was set up by Janus Friis and Niklas Zennstrom, the two men who originally developed the online communications system, and found itself in a major IP war with the consortium that purchased Skype from eBay, as well as with eBay itself. Copyright and patent infringement were alleged, amid accusations that eBay had not acquired much of the IP underpinning Skype when it bought the company in 2005.

The case flared up in 2009 around the time the consortium paid eBay a reported $2.5 billion for a majority stake in Skype. Surveying the carnage back then I said it made a very strong case for the chief IP officer position. With a CIPO in play, I wrote, it would have been much more likely that the significant IP issues at the heart of all the Skype transactions would have been dealt with in a way that would have prevented subsequent litigation; something which, in turn, may have allowed eBay to do more with what it bought and to sell it on for a higher price when the time came.

In the end the litigation went away after a settlement in which, among other things, Friis and Zennstrom bought a 14% stake in Skype and joined the company’s board. Today comes the news that Microsoft is planning to spend $8 billion plus on acquiring Skype. Clearly, this will make Friis and Zennstrom a fortune, as well as all the other investors that bought into the company back in 2009. Even eBay will make some money, given that it retained a 30% share.

Inevitably, people will ask whether Microsoft is paying too much. More pertinent, perhaps, is whether eBay sold for too little. Unlike eBay, Microsoft does have a chief IP officer. You can bet your bottom dollar that Horacio Gutierrez and his team have been heavily involved in the due diligence that must already have taken place, and will also be in the thick of what comes next. They will check every patent, copyright, trade secret and other right to make sure that Microsoft is getting exactly what it is paying for. If eBay had done the same thing in 2005, it may have been in a much stronger position to charge the 2009 consortium a higher price, or to generate interest from other parties.

As for Friis and Zennstrom, they have each made hundreds of millions of dollars directly as a result of creating, and then ensuring ownership of, valuable IP. They are individuals who had an idea and, thanks to patents and copyrights, have been able to develop it to create a product used by countless people around the world. And they have monetised it not once, but twice. Don’t tell them that IP is only for big corporations.