And Another One: Nortel Latest To Sue Vonage Over VoIP Patents

from the who-else? dept

A "patent thicket" is when so many different entities claim patents on a particular space or product, it becomes nearly impossible for any company to actually put a product out in that space without either having to pay ridiculous patent license fees or face a series of patent lawsuits. There are plenty of patent thickets out there -- and a big one is in the VoIP space. The concept of using internet protocol for voice communications has been out there for ages, and there were lots of attempts to get such a service working in the late 90s. While technically it was possible, the real problem was that most users didn't want to go through the hassle of setting things up to use VoIP. Vonage was the first company to get past that hurdle by making things easy: you plug a box into your modem, and then you plug in a phone -- and everything works just like your current telephone. It was this simplicity, combined with a big advertising campaign, that made VoIP popular. It certainly wasn't the basic technology advances that almost everyone in the space had figured out well before. Yet, Vonage's ability to attract users made lots of other firms jealous, leading to a series of patent lawsuits. Earlier this year, under pressure from Wall Street, Vonage agreed to settle such patent lawsuits from Verizon and Sprint, as well as some tiny patent holders. As we noted at the time, this was simply flinging the gates wide open -- and anyone who had any kind of patent related to VoIP should probably sue Vonage as fast as possible.

AT&T couldn't resist and dredged up some VoIP patents itself. And, sure enough, Vonage quickly settled. Of course, that wouldn't be the end. Now along comes Nortel, who has also sued Vonage for infringing on nine separate patents. To be fair, Vonage may have also brought this one on itself, having first sued Nortel over its own patents, leading Nortel to retaliate. You would have hoped that Vonage would have learned its lesson that patent battles aren't particularly helpful, but it appears that the company took away the wrong lesson, and is hoping to get in on the patent dollar bonanza. All we're really seeing is a blatantly clear explanation of how patents are holding back innovation, rather than promoting the progress of useful sciences. Update In the comments, someone from Vonage notes that the company did not quite initiate this, as the lawsuit actually came from another company that Vonage acquired.


Reader Comments (rss)

(Flattened / Threaded)

  •  
    identicon
    Jason, Dec 17th, 2007 @ 9:00am

    Disclaimer, I work for Vonage.

    From what I understand about the case, Vonage itself did not file against Nortel. Apparently, this suit against Nortel was originally filed in 2004 by Digital Packet Licensing. Vonage then acquired the patents (and subsequently the litigation) in the suit in 2006.

     

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    Killer_Tofu (profile), Dec 17th, 2007 @ 9:31am

    Uhh

    Isn't it possible for Vonage to just say, "If you want money for patents, you'll have to fight those we've already paid".
    Haven't they already been sued for every single aspect of their business?
    In which case it would be the patent office's fault for issuing so many redundant / broad patents.
    They have already paid liscensing fees / settlements for everything they do.

    Or is my logic here somehow flawed?
    It makes sense, but I know the stupidity of our court & patent systems wouldn't allow it.

     

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      moe, Dec 17th, 2007 @ 10:16am

      Re: Uhh

      Your logic is flawed. No two companies can own the same patent. So, we assume Nortel's patents are sufficiently separate from all the others.

      Which begs the question -- how can so many different companies hold so many different patents on the same technology? Sure, I can see 1, 2, or maybe even 3 different companies holding different patents for different parts of the technology. But with this many companies raising up with claims against Vonage, at some point wouldn't a "prior art" or "obviousness" clause kick in? Unfortunately, since Vonage doesn't want to pay for trials for all of it, it won't be challenged.

       

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      angry dude, Dec 17th, 2007 @ 10:32am

      Re: Uhh

      "is my logic here somehow flawed?"

      You bet it is, dude
      You have a logic of an imbecile
      Go get your GED, punk

       

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    Anonymous Coward, Dec 17th, 2007 @ 10:11am

    So many words, so little information. Seems to me Vonage is the only company getting hammered for patents in this space. Think maybe there is a reason for that? When was the last patent lawsuit filed against AT&T, Verizon, Cox Communications, Time Warner Cable, Sunrocket or any other company out there using VoIP.

    There are many forms of VoIP, companies use many different ways to get there. Seems Vonage decided to take some shortcuts.

    They chose that route, they decided to cut corners. Cutting corners allowed them to offer cheap phone service, but is that what we really want to encourage?

     

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      angry dude, Dec 17th, 2007 @ 10:39am

      Re:

      cheap phone service ???

      It wasn't cheap to Vonage investors

      I can offer *free* phone service if I find enough clueless idiots with enough money to spend like couple hundred bucks per each new sibsriber

      heck, what a brilliant business plan !!! Spend other people's money on building large subscriber base only to be sued for patent infringement ....

      Those Skype guys are a lot smarter

       

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      Mike (profile), Dec 17th, 2007 @ 11:13am

      Re:

      Seems to me Vonage is the only company getting hammered for patents in this space. Think maybe there is a reason for that?

      There are a few reasons.

      (1) Vonage is an easy target. They're big, with lots of publicity and they raised millions of dollars in the public market. That makes them an easy target.

      (2) They didn't have a huge patent portfolio of their own, with which they could countersue.

      (3) They beat all of these firms to the market, making those firms jealous.

      When was the last patent lawsuit filed against AT&T, Verizon, Cox Communications, Time Warner Cable, Sunrocket or any other company out there using VoIP.

      Which of these firms is not like the other... Sunrocket is out of business and never had any money in the first place. But as for the others, many have their own patent portfolios, so you get a nuclear stockpiling situation, where no one wants to sue each other to set off a patent war. Vonage had no such patents... hence it getting sued.

      What you claim is "cutting corners" was not. With almost all of these patents, you can easily point to prior art in the space, or the fact that the concepts were clearly obvious to those in the space. Unfortunately, the USPTO's standards for approving patents don't actually look at real prior art or real obviousness.

      Furthermore, even if they had taken all of these ideas... why should that matter? Vonage succeeded by putting them all together where no one else could. Isn't that what we should be encouraging? The progress came through Vonage's ingenuity. It didn't come from AT&T, Verizon, Sprint or Nortel... all of whom sat back and hoped that VoIP would never amount to anything.

       

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        Sean, Dec 17th, 2007 @ 11:41am

        Patent stockpiling

        I had never considered patent stockpiling as a deterrent among big firms in the same market space, but it certainly makes sense. Thanks for mentioning it.

         

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        angry dude, Dec 17th, 2007 @ 12:24pm

        Re: Re:

        "Vonage succeeded by putting them all together where no one else could. Isn't that what we should be encouraging? The progress came through Vonage's ingenuity"

        Mikey is smoking weed again while typing utter nonsense on his keyboard...

        and this is called "journalism" these days...

         

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          Jason Still, Dec 17th, 2007 @ 12:52pm

          Re: Re: Re:

          You offer such intriguing and insightful comments and such a wealth of evidence to back up all of your claims, angry dude. I personally am in awe of your obviously superior intellect. Do you perhaps have some sort of newsletter/blog/publication that I might subscribe to, that I may partake of your invaluable wisdom more often?

           

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    identicon
    Vonage Customer, Dec 17th, 2007 @ 10:12am

    Better than LAN...

    After switching from Time Warner's POS cable phone, poor reception most of the time and getting ripped off to boot, I have nothing but outstanding things to say for Vonage;

    1) Only those who I give my number to call, no more sales weasels.

    2) Every message I receive gets sent to my email.

    3) I can check every single incoming and outgoing call via their web portal, that's a first.

    4) Caller ID displayed on your TV, no charge.

    5) Very nice 4 port modem router FREE.

    6) Signed up on a Saturday and received modem Monday.

    7) $31.88/month total cost for unlimited calling, PRICELESS!

     

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      angry dude, Dec 17th, 2007 @ 10:44am

      Re: Better than LAN...

      "$31.88/month total cost for unlimited calling, PRICELESS!"

      yeah...

      Add the cost of Comcast cable internet or Fios to this figure

       

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        Dial-up fan, Dec 17th, 2007 @ 11:22am

        Re: Re: Better than LAN...

        Yes, because none of would pay for broadband unless our phone service was using it, right?

         

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    Puzzled Anonymous Coward, Dec 17th, 2007 @ 1:18pm

    I wonder why characters like angry dude are around criticizing techdirt bloggers.

    They seem not to contribute to the discussion and have a tendency to stir things up with baseless assertions.

    Don't they have anything better to do than trolling?

     

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    identicon
    Anonymous Coward, Dec 17th, 2007 @ 1:25pm

    (1) Vonage is an easy target. They're big, with lots of publicity and they raised millions of dollars in the public market. That makes them an easy target.

    (2) They didn't have a huge patent portfolio of their own, with which they could countersue.

    (3) They beat all of these firms to the market, making those firms jealous.

    1, how does that make them different than the other VoIP cable companies?

    2. Yeah, because they just used everyone elses technology.

    3. Thats pretty funny. I bet the guys at Verizon were just drooling over Vonage's quarterly loss each and every quarter that Vonage has been in existance. I bet Ed spent all his time trying to come up with net losses so he could take that to wall street.

    In what world is losing money a good business model? Forget the lawsuits, Vonage has never turned a profit.

     

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      Mike (profile), Dec 17th, 2007 @ 2:13pm

      Re:

      1, how does that make them different than the other VoIP cable companies?

      Again, Vonage didn't have the same ability to fight back as the cable companies do. Also, the cable companies didn't have nearly the same level of publicity surrounding VoIP as the cable companies did.

      2. Yeah, because they just used everyone elses technology.

      Again, that's not true and secondly, even if it were true, it wouldn't matter.

      Your claim that they used everyone else's technology is laughable. When Vonage launched, can you tell me which of the companies suing it had a matching product on the market?

      3. Thats pretty funny. I bet the guys at Verizon were just drooling over Vonage's quarterly loss each and every quarter that Vonage has been in existance. I bet Ed spent all his time trying to come up with net losses so he could take that to wall street.

      The guys at Verizon were drooling over the fact that they were losing customers to Vonage, absolutely. They were scared shitless, which is why they sued. It wasn't about the quarterly numbers. The folks at Verizon were quite aware of the nature of the land grab, and the fact that it was increasing their own churn. Ed Whitacre absolutely recognized that.

       

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    identicon
    jb, Dec 17th, 2007 @ 1:41pm

    angry dude

    Maybe we should have angry dude go hang with mike and some some weed, and come back mellow dude.

     

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    Anonymous Coward, Dec 17th, 2007 @ 2:20pm

    The guys at Verizon were drooling over the fact that they were losing customers to Vonage, absolutely. They were scared shitless, which is why they sued. It wasn't about the quarterly numbers. The folks at Verizon were quite aware of the nature of the land grab, and the fact that it was increasing their own churn. Ed Whitacre absolutely recognized that.


    Come on Mike, get real. They didn't care about Vonage. They were afraid of VoIP, but not because of Vonage. They have always known that VoIP opens them up to the cable companies, that is what they are afraid of. Vonage? Thats pretty funny.

     

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      Jason Still, Dec 17th, 2007 @ 2:45pm

      Re:

      I think this whole issue goes a lot deeper.

      When I was on cable several years ago, I had digital phone service through them, but it was branded as AT&T (Insight was the cable co). So there's an example of a cable company and a phone company coming together on VoIP. The big cable companies also rely pretty heavily on the phone companies (at the very least AT&T) for backbone internet connections. While the cablecos and telcos might have a bit of a love-hate relationship, there's one thing they can both agree on: they don't want to become just a dumb pipe. So I disgree, AC...I think they care very much about Vonage, but only partially for the reasons most ascribed to them. The real issue, I believe, is that as more people move to such third-party offerings, more people begin to demand the decoupling of services from the connection, and that's precisely what both the cable and telephone companies want most to avoid.

       

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      Jason, Dec 17th, 2007 @ 2:45pm

      Re:

      Anon,

      Think of it this way. Vonage was/is the top name in the VoIP space (depending on your point of view). If Verizon was able to successfully get after Vonage, it would allow them to pretty much get after everyone else and effectively let them hold the key to entering the VoIP space. The case may have been about Vonage, but it was a battle in a bigger arena of them protecting their business model over getting market share. Vonage just happened to have the biggest bullseye and provided the biggest turnaround for the market depending on how the case went.

       

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    identicon
    Anonymous Coward, Dec 17th, 2007 @ 2:54pm

    I disagree. The risk to the telco's was never and will never be a stand alone player (a pure play)

    Hell, a cable company in Canada was giving away voice. How do you compete against that if you are a pure play company?

    It is about the bundle, not about unbundling. No one will make much money as a pure voice player, because that is a commodity. What was Vonages options? Wonder why no one wanted to buy them?

     

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    Anonymous Coward, Dec 18th, 2007 @ 7:58am

    Jason, pretty much every cable and phone company offers VoIP. The Verizon lawsuit didn't happen until after Vonage's IPO. Everyone had VoIP already on the market, how could this lasuit give Verizon the keys to the marketplace?

    Forget about the lawsuits, Vonage is not and has never been profitable.

    Are some of the lawsuits bullshit? Sure, but people shouldn't try to turn Vonage into something its not and never has been.

     

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    Cordless Phone, Feb 21st, 2010 @ 8:04pm

    Enlightened

    Love to read an update on this article from the distant past and maybe get some further insight into how Vonage continues to survive against all the odds.

     

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