Vonage Settles Verizon Patent Dispute; Next Up: AT&T

from the cheaper-to-settle-than-to-fight dept

Just a couple weeks ago, we noted that Vonage appeared to be settling all its patent disputes -- with the one exception being Verizon. Well, you can cross that one off the list as well, as Vonage is paying $120 million to Verizon to settle its patent dispute. This is something of a joke. There's been plenty of prior art discovered on Verizon's patents -- and it was quite clear that Vonage didn't take this idea from Verizon at all. In fact, Vonage had been the innovator. The first company that was able to take all of these ideas and package them up in a way that customers actually wanted. Verizon, on the other hand, came to market well after Vonage was already gobbling up marketshare and did a terrible job marketing its product, which failed to generate much interest. So, after losing in the marketplace, Verizon simply sued the company that did a better job. That's not the sort of activity the patent system is designed to encourage. However, Vonage so far had trouble proving its case in court, and it's become clear that Vonage's investors wanted the lawsuits off the decks (perhaps to facilitate a sale), so Vonage is settling as fast as it can. In fact, as soon as news broke that this lawsuit was settled, the stock popped -- so you could say that investors are helping to pay the settlement. Of course, when you're just handing out money for bad patents like that, it should come as little surprise that others are rushing to join the party. Witness AT&T's decision to sue Vonage for patent infringement just last week. Anyone else have a vague, overly broad and obvious patent on VoIP that can be used to squeeze some free money out of Vonage? Now's the time...


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Anonymous Coward, Oct 25th, 2007 @ 10:22pm

    Re: Editing

    get uh life

     

    reply to this | link to this | view in thread ]

  2.  
    identicon
    Willton, Oct 25th, 2007 @ 10:55pm

    TechDirt spews more nonsense

    1. Once again, Vonage did not innovate. Innovation requires creating something new. Vonage did not do that. All Vonage did was bring VoIP to the market. That's not innovation; that is successful marketting. Vonage should be commended for making VoIP accessible, but they should not be called innovators for the work that they did. It's inappropriate.

    2. You keep citing this prior art that was found on Verizon's patent, and yet that did not invalidate the patent for obviousness at the trial level. Why not? Was the Judge an idiot? Here's a better question: if the patent was so damn obvious, as you seem to claim that it is, then why did Vonage not appeal the district court decision on invalidity? The CAFC never reached an invalidity issue over the patent because Vonage never brought it up on appeal. Don't you find it strange that Vonage never appealed the patent's validity if the patent is as obvious as you say it is? That's tantamount to Vonage saying that the patent was not obvious, even in light of all this prior art that you cite. If the trial court says it's nonobvious, and Vonage's lawyers say it's nonobvious, why are you so damned sure that the patent is obvious?

     

    reply to this | link to this | view in thread ]

  3.  
    identicon
    Anonymous Coward, Oct 25th, 2007 @ 11:03pm

    The patent concept is broken.

     

    reply to this | link to this | view in thread ]

  4.  
    icon
    Mike (profile), Oct 25th, 2007 @ 11:37pm

    Re: TechDirt spews more nonsense

    1. Once again, Vonage did not innovate. Innovation requires creating something new. Vonage did not do that. All Vonage did was bring VoIP to the market. That's not innovation; that is successful marketting. Vonage should be commended for making VoIP accessible, but they should not be called innovators for the work that they did. It's inappropriate.

    You seem confused about what innovation is. As has been discussed at length many times before, what you described IS innovation. Invention is about creating something new. Innovation is about successfully bringing that new thing to market. Not only that, but studies have shown that it is this act of innovation (successfully bringing something to market) that is what boosts the economy. So we should be cheering on that act. Invention is a part of it, to be sure, but innovation is the key -- and Vonage was exceptionally innovative in bringing their product to market.

    2. You keep citing this prior art that was found on Verizon's patent, and yet that did not invalidate the patent for obviousness at the trial level. Why not? Was the Judge an idiot? Here's a better question: if the patent was so damn obvious, as you seem to claim that it is, then why did Vonage not appeal the district court decision on invalidity? The CAFC never reached an invalidity issue over the patent because Vonage never brought it up on appeal. Don't you find it strange that Vonage never appealed the patent's validity if the patent is as obvious as you say it is? That's tantamount to Vonage saying that the patent was not obvious, even in light of all this prior art that you cite. If the trial court says it's nonobvious, and Vonage's lawyers say it's nonobvious, why are you so damned sure that the patent is obvious?

    I'm sure it's obvious because I can read the damn patent, and I've seen what the real innovators in the VoIP space have said about the patent and it's obviousness. There are plenty of reasons why Vonage chose not to question the validity of the patent -- in large part because it's a loser's game. It's almost impossible to win that game in any reasonable amount of time thanks to the way the courts and the USPTO view the patent system.

     

    reply to this | link to this | view in thread ]

  5.  
    identicon
    glitch, Oct 26th, 2007 @ 12:57am

    all legal stuff aside

    i have played with all three services

    even with loses, money and cases,vonage still performs

    i tries voicewing and callvantage, both were left lacking

    i have a friend, who went with vonage at my suggetion [he owns and isp] and he runs vonage at his office and his wife has verizon at their house

    vonage consistantly outperforms verizon

    2 1/2 million subscribers, i dont see them just disappearing
    nor do i see the courts forcing them to close

    i'm not a lawyer...could they settle as much as they can, then go in to banktuptcy ?? i don't know.....

     

    reply to this | link to this | view in thread ]

  6.  
    icon
    MadJo (profile), Oct 26th, 2007 @ 2:15am

    Re: Editing

    On point 4 of that site you linked to:
    "I think that our foreign policy effects the situation"
    http://xkcd.com/326/

     

    reply to this | link to this | view in thread ]

  7.  

    Patent Settlements

    I can't remember when there has been so many patent lawsuits in the news. Who is next?

     

    reply to this | link to this | view in thread ]

  8.  
    identicon
    Chronno S. Trigger, Oct 26th, 2007 @ 5:35am

    Re: TechDirt spews more nonsense

    I agree with Mike on this one. If you had read the patent and had any idea how VOIP works, you would to. That is why the patent wasn't invalidated, because no one who had a say knew what the hell they were talking about.

    Verizon sued for a patent that covered the entirety of Vonage. That is to say, Vonage would be literally nothing without that technology covered in Verizon's patent. AT&T and Sprint are suing for patent infringement as well. Even if Vonage is infringing with only a small peace of technology, AT&T and Sprint are infringing on Verizon's patent because Verizon's patent covers everything Vonage douse. How is that not obvious to you?

    If Vonage settled with Verizon, douse this mean they have to pay licensing? I got Vonage to not pay Verizon. It's like buying a CD from an indie artist just to find out that the money is still going to the RIAA. It's F***ing wrong.

    PS: Someone please point me to Sprint and AT$T's patent that Vonage is infringing on so I can see it for myself.

     

    reply to this | link to this | view in thread ]

  9.  
    identicon
    Mr.Obvious, Oct 26th, 2007 @ 5:44am

    And guess what...

    Al Gore can sue them all cause he invented the Internet and EVERYONE is using his ideas.

     

    reply to this | link to this | view in thread ]

  10.  
    identicon
    RandomThoughts, Oct 26th, 2007 @ 6:16am

    How do you consider bringing to market an inferior product, huge marketing expenses and prices that don't allow profits to be innovation?

    Unless your idea of success is different than mine, Vonage could in no way ever be considered a successful business, before or after the lawsuits.

    That being said, the patents are not what will end Vonage, the bundles will. When Verizon moves into an area with FiOS, thats bad for the cable company that is there, but it is worse for players like Vonage.

     

    reply to this | link to this | view in thread ]

  11.  
    icon
    boomhauer (profile), Oct 26th, 2007 @ 6:46am

    not only

    not only is the patent system broken, it is ruining american business. personal experience. as a small biz, ive finally decided to quit trying to get my own patents because i dont have 6 million to defend them against (each)any infringers. and i sure dont have that money to defend myself. So Ill just pay licensing to whatever bully decides to come after me, and if my cost of business gets to be too high, ill just do something else. Maybe in another country.

     

    reply to this | link to this | view in thread ]

  12.  
    identicon
    Willton, Oct 26th, 2007 @ 7:24am

    Re: Re: TechDirt spews more nonsense

    You seem confused about what innovation is. As has been discussed at length many times before, what you described IS innovation. Invention is about creating something new. Innovation is about successfully bringing that new thing to market. Not only that, but studies have shown that it is this act of innovation (successfully bringing something to market) that is what boosts the economy. So we should be cheering on that act. Invention is a part of it, to be sure, but innovation is the key -- and Vonage was exceptionally innovative in bringing their product to market.

    Ahem. The American Heritage Dictionary definition of innovation:

    innovation (n.):
    1. The act of introducing something new.
    2. Something newly introduced.

    If VoIP has been around for as long as you say it has, how is what Vonage did "introducing something new"? Maybe YOU are the one confused as to what innovation is. Bringing something to the market is not what innovation is about. Innovation is about taking something that's old and changing it or improving it so that it is somehow new, and then introducing it to the public. Vonage missed a step. All Vonage did was bring VoIP, an old idea, to the market. Again, that's not innovation; that's successful marketing.

     

    reply to this | link to this | view in thread ]

  13.  
    icon
    Mike (profile), Oct 26th, 2007 @ 12:02pm

    Re: Re: Re: TechDirt spews more nonsense

    Wilton,

    I'm talking about innovation from the economics standpoint, where innovation is clearly defined as successfully bringing something to market.

    You can argue *semantics* all you'd like, but the key point is what's more important to the overall economy? It's bringing a product successfully to market. The goal of the patent system is to encourage exactly that. The entire reason for the patent system is that it's an upfront *cost* that is designed to bring better results to the wider economy.

    Who did that? Who brought the product out and made it useful and worth paying for? Not Verizon. Not Sprint. Not AT&T. Vonage did. They're the innovators here, whether you like it or not.

    You trash it as just "marketing," but go back and look at almost any successful technology. The key to its success wasn't its "newness" but the ability to get it out to people properly. It's always about the marketing. Thomas Edison wasn't a great inventor, he was a great marketer. Same with Henry Ford. They're innovators. Not because they did something new. But because they were able to take something that others were working on and bring them to market much more successfully in a way that had a real economic impact.

    That's what the patent system is designed to encourage, and it's clearly not what is happening in this space. The *losers* who were unable to bring their product to market successfully are suing those who could.

     

    reply to this | link to this | view in thread ]

  14.  
    identicon
    Willton, Oct 27th, 2007 @ 2:33pm

    Re: Re: Re: Re: TechDirt spews more nonsense

    You trash it as just "marketing," but go back and look at almost any successful technology. The key to its success wasn't its "newness" but the ability to get it out to people properly. It's always about the marketing. Thomas Edison wasn't a great inventor, he was a great marketer. Same with Henry Ford. They're innovators. Not because they did something new. But because they were able to take something that others were working on and bring them to market much more successfully in a way that had a real economic impact.

    Excuse me? Thomas Edison was not a great inventor? The man who created the incandescent lightbulb with a high resistance filament, the invention that allowed Americans to illuminate their dwellings cheaply and efficiently? He's not a great inventor?

    There were other incandescent lightbulbs out there at the time of Edison, but none of were practical due to low resistance filaments (like most metals) that required high amounts of current to power. Edison was the first and only one to experiment with high resistance filaments, and his success is what we use today.

    I will agree with you that the fact that Edison's bulb had a great economic impact on the U.S. does make him great, but that's because it was an astounding invention, not because he was the one that sold the invention. If he had sold or licensed those rights to someone else and that entity marketed his idea for him, his invention would likely have been no less great. It is Edison's invention that made him notorious, not his marketing.

     

    reply to this | link to this | view in thread ]

  15.  
    identicon
    nate gaikwad, Oct 29th, 2007 @ 3:19am

    vonage is innocent!

    Topics: Wolfe's Den

    AT&T Suit Against Vonage Makes Mockery Of U.S. Patent System
    Posted by Alexander Wolfe, Oct 22, 2007 09:50 PM » E-Mail
    » Print
    » Write To Editor
    » Digg
    » Slashdot



    Is the U.S. patent system irretrievably broken, or are aggrieved parties justifiably defending their turf against infringement by companies unfairly trying to benefit from the fruits of their labors? Looking at AT&T (NYSE: T)'s lawsuit against Vonage, it definitely seems to me like it's the former.

    On first glance, I figured I'd have to be crazy to defend Vonage, given how they've been batted around by the legal system lately. The VoIP vendor is already oh-for-two in patent lawsuits, having previously agreed to pay Sprint (NYSE: S)-Nextel some $80 million. Vonage also is appealing a jury finding in favor of Verizon (NYSE: VZ).

    However, when I got into it a little deeper, it became apparent that it's not Vonage, but rather the patent system, which has the problem.

    The U.S. patent system -- set up in 1793 and modernized in 1953 -– is simply not up to the task of assessing the patentability of modern technological developments. For one thing, the patent office has been periennially understaffed. More important, its examiners don't have the kind of broad or deep expertise required to parse patent applications in everything from biotech to embedded software.

    Finally, there's the problematic issue of "prior art." If what you're trying to patent is something that should be obvious from that which already exists, you're not supposed to get a patent.

    Which is where the AT&T versus Vonage case comes in. According to The New York Times story, the patent AT&T is suing over was "filed in 1996, [and] appears to broadly describe the idea of routing telephone calls over data networks like the Internet. The listed inventor is Alexander Fraser, AT&T's former chief scientist."

    Normally, I would simply go get the lawsuit documentation to find the patent number, but the case, filed Oct. 17, hasn't yet been uploaded to Pacer. So I went to the U.S. Patent and Trademark Office's database.

    Patent 6,487,200 seems to fit the bill. Entitled "Packet telephone system," it was filed on April 4, 1996, and awarded on Nov. 26, 2002, to AT&T. The inventor is one Alexander Gibson Fraser. [Update, Oct. 23, 8:00 am. This is indeed the patent. Unbeknownst to me, John Paczkowski at Digital Daily blogged about this 18 hours before I did, and he linked to the court papers, here (download).]

    Here's the description of the invention, from the patent's abstract:

    "A packet telephone system which employs a packet network that provides virtual circuits. The packet telephone system employs short packets containing compressed speech. The use of the short packets makes possible compression and decompression times and bounded delays in the virtual circuits which are together short enough to permit toll-quality telephone service. The packet telephone system employs an intelligent network interface unit to interface between the packet network and standard telephone devices. The network interface unit does the speech compression and decompression and also responds to control packets from the packet network. Consequently, many telephone system features can be implemented in the network interface unit instead of in the switches. . . The combination of virtual circuits, with bounded delays, short packets, rapid compression and decompression, and intelligent network interface units makes it possible to build a telephone system with fewer and cheaper switches and fewer links for a given volume of traffic than heretofore possible and also permits substantial savings in provisioning and maintaining the system."
    I rest my case! Consider this: A sober assessment of this patent clearly indicates it's describing a VoIP-like set-up. However, it's also clearly saying that the packetized, VoIP-like scheme it describes is being used over a traditional telephone network. (I'm referring to that stuff about "switches" and "toll-quality telephone service.")

    Plus, look at the diagram used in the Fraser patent. It's for an ATM network.



    System block diagram, from AT&T's packet telephone patent. (Click picture to enlarge, and to see a second diagram.)


    Where's the applicability of this patent to voice over the Internet? It isn't applicable, because it's not a VoIP patent.

    More important, even if AT&T's patent is theoretically applicable to the Internet, why should AT&T be allowed to claim such rights? If I set up an packet-based extraterrestrial communications network five years from now, should AT&T "own" the rights to it? By extension (assuming patents didn't expire), should Alexander Graham Bell?

    We've really got to rethink this stuff.

     

    reply to this | link to this | view in thread ]


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here
Get Techdirt’s Daily Email
Save me a cookie
  • Note: A CRLF will be replaced by a break tag (<br>), all other allowable HTML will remain intact
  • Allowed HTML Tags: <b> <i> <a> <em> <br> <strong> <blockquote> <hr> <tt>
Follow Techdirt
A word from our sponsors...
Essential Reading
Techdirt Reading List
Techdirt Insider Chat
A word from our sponsors...
Recent Stories
A word from our sponsors...

Close

Email This