Net2Phone dials up lawsuit against Skype

Net2Phone charges eBay and Skype with violating a patent on a method for establishing a link between two devices over the Internet

Net2Phone has sued eBay and its Skype unit, alleging that they infringed on a patent it obtained in 2000 and seeking a permanent injunction as well as unspecified monetary compensation.

Net2Phone charged eBay and Skype with violating U.S. Patent 6,108,704, which describes a method for establishing a point-to-point communications link between two devices via Internet protocol.

Net2Phone and Skype compete in the VOIP (voice over Internet protocol) market. They provide services that let users talk to each other via the Internet using either PCs or telephones.

An eBay spokeswoman said the company hasn't been served with the complaint and can't comment on the lawsuit. Net2Phone didn't immediately return a call seeking comment. Net2Phone filed the lawsuit Thursday in the U.S. District Court for the District of New Jersey.

Last year, eBay bought Skype for about $2.6 billion, snapping up a fast-growing company that had quickly become immensely popular worldwide because of the high quality of its voice communications and user friendly interface. Founded in 2003, Skype already had around 54 million registered users in 225 countries when eBay announced its intention to acquire it in September 2005.

Skeptics have said eBay paid too hefty a price for Skype, but eBay contends that VOIP is a key ingredient for its online marketplace, a service that will significantly improve the communication between buyers and sellers.

Skype's business and usage continue to grow quickly. It ended its 2006 first quarter on March 31 with almost 95 million registered users. Its revenue jumped 42 percent to $35.2 million from 2005's fourth quarter. In 2004, it had revenue of around $7 million.

Meanwhile, Net2Phone ended its 2006 second quarter on Jan. 31 with $25.8 million in revenue, up 19 percent from 2005's fourth quarter and 45 percent from 2005's second quarter. The company recorded a net loss of $4.1 million in 2006's second quarter, narrower than the net loss of $10.6 million in 2005's second quarter.

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