Earlier this week we reported that the founders of Skype were filing suit against eBay over a piece of programming code they allege the auction site is using without permission. They’re asking $75 million in damages for every day that eBay continues to use the code. How did they arrive at such an astronomical number?
In this case, the “damages” are calculated based on two things: the first is the maximum damages that this kind of copyright infringement can incur according to California statutes. This is known as the “cause of action,” and is put forth in paragraph 133 of the suit, which you can read here.
“What this paragraph says is that under this section of the copyright act, the max amount of damages is $150,000 for every day of violation, says Randy Katz, an M&A lawyer who orchestrates tech and biomedical deals for the Baker Hostetler firm in Southern California. But that’s per violation–and according to the founders’ lawyers, each eBay user that access that piece of code counts as one single violation. Crunch the numbers, and the Skype founders are assuming that hundreds of people are using the lifted code per day; hence the $75 million figure. “Separate from that if you have suffered “actual damages”–stolen profits–you can ask for those as well,” says Katz, who is unaffiliated with either party.
“Still, the fact that you’ve put this good stuff in a compaint doesn’t make it so,” says Katz. “EBay and Skype will come back with their own filings, which will be called an ‘answer,’ and it’ll say, basically, ‘No, we didn’t breach your copyright.'” There may also be a cross complaint in which the corporation argues that the founders are actually the ones at fault.
Even if the Skype founders get their way, there’s little chance that they’ll ever see such a massive payoff. “Substantially every lawsuit that is filed settles out and never goes to trial,” says Katz. “Even if Skype is wrong, they’re not going to end up paying that much.” The settlement amount will depend on the facts and circumstances, he says, as well as the chicanery of the lawyers on each side.