Verizon Uses VoIP Patent to Cripple Vonage: What Does It Mean for the Rest of Us?
In a clear case of ganging up on the newbie, incumbent telecommunications provider Verizon is using it IP portfolio to beat down VoIP golden boy (but losing money lately) Vonage. Vonage has made a new business out of convincing customers to replace their existing costly landline services with a voice-over-IP (VoIP). This, of course, directly eats into the bottom line of Verizon that provides landline services to most of northeastern United States. Looks like Verizon is fighting back (article from Bloomberg online).
Vonage Holdings Corp. was ordered by a judge to stop using Verizon Communications Inc. technology that lets customers make calls to standard phone lines, threatening the money-losing Internet phone company’s survival.
U.S. District Judge Claude Hilton approved a Verizon request that may cripple the service today, sending Vonage shares to a record low. Hilton, in Alexandria, Virginia, said he won’t sign the order before a hearing in two weeks on Vonage’s request for a stay. A jury found March 8 that Vonage infringed three patents and said it should pay Verizon $58 million.
I have been surfing around for the details of this patent infringement case. I did not find much except that the patents describe a way of “routing VoIP calls to the PSTN” and other call handling functionality. However, it seems to me that the Verizon patents in question might have been overtly broad and could cast a shadow over all VoIP players (especially the smaller players with no defensive patents). Also that it was ruled by a jury who is probably not versed in the subtleties of the technology? Verizon probably chose Vonage because it is the largest pure-play VoIP provider in the market today. Unlike the RIM and NTC case, RIM was bigger of the two companies and could definitely fight it out. In this case, Vonage is the smaller of the two and already has existing problems. Does this mean an end to Vonage? How about pure play VoIP?
