In recent years, various state regulators, desperate to dredge up extra tax income, have targeted VoIP providers, using the infamous "like a duck" test, to say that since they look like a traditional telephone service, they need to pay taxes like one -- despite the fact that they don't make use of the same infrastructure (which is part of the reason why telco services were taxed in the first place). A couple years ago, an appeals court rejected this theory in Minnesota, and now an appeals court has come to the same conclusion in Nebraska, stating that VoIP services, such as Vonage, are not telecom service providers, and thus are not responsible for taxes such as the Universal Service Fund. Of course, this also contradicts some other rulings... so perhaps we'll eventually see this in the Supreme Court as well.

The reason patent hoarding firms are often successful in getting companies to pay up has little to do with the quality of their patents, but the fact that fighting these lawsuits out in court is so very expensive and time consuming. It's often much easier and cheaper to just settle. Klausner Technologies has been very successful in getting companies to pay up for daring to use the concept of "visual voicemail." Klausner for years has basically claimed ownership to any sort of "visual" phone info, such as the time it sued AOL for daring to display caller ID info on your screen -- something that clearly no one would have ever thought of if not for Klausner's patent. AOL just settled rather than deal with the mess of fighting it. Ditto for a similar lawsuit against Vonage. The latest trio to settle up are Apple, eBay and AT&T. With Apple and AT&T the lawsuit was over the visual voicemail feature found on the iPhone -- guess all those patents Steve Jobs hyped up didn't protect it from patent lawsuits.

So now Klausner has even more money to go after others (Comcast and Cablevision are listed as targets) -- and it will use the fact that all these big name companies settled as "evidence" that its patents are valid, even if the only thing it really means is that companies did the math and realized it's cheaper to settle. Even the press is falling for this false claim. News.com notes that Apple, AT&T and eBay probably would have lost because AOL and Vonage licensed the patent. That's not at all true. Both companies settled because it was cheaper and easier, rather than due to any acknowledgment that the patents are valid. The fact that some firms settle have no bearing on whether or not other companies could have won in court.

We've covered in too much detail how it's some sort of "open season" on Vonage when it comes to VoIP patents. After dealing with ridiculous and expensive patent lawsuits from companies who failed to actually innovate in the same way Vonage did, the company was pressured by Wall Street to quickly settle the various patent lawsuits filed against the company. Of course, rather than settle matters, that simply opened the door for other companies to go searching through their patent portfolios to see if there was anything they could sue Vonage over. Indeed, following those settlements it didn't take long for AT&T to dig up a patent and sue -- which was quickly settled as well. Thought things were over? No such luck. Nortel just showed up last month to sue and it took all of about a week and a half for Vonage to settle that case as well.

The Nortel case is slightly different because Vonage actually already had a patent infringement lawsuit going against Nortel, but it wasn't really initiated by Vonage. Instead, it had been initiated by a patent holding firm that Vonage bought in 2006. The end result of the settlement doesn't involve money changing hands, but just a cross licensing agreement for the patents. So what's the big lesson that Vonage and others have learned from this? It's certainly got nothing to do with innovating. It's to hoard as many patents as possible so that you have your own nuclear stockpile for when someone else sues you. Want to know why the USPTO is overwhelmed? It's not because there aren't enough examiners (as some will claim) or that there aren't enough funds. It's because the way the system now works is that you are supposed to file patents on every tiny little advancement so you can use it to protect yourself against lawsuits from everyone else. That's not about innovation. It's about waste. In the meantime, since it's still open season at Vonage, who's going to be next? There are a ton of other patents in the VoIP space that can surely be used in a lawsuit, right?

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.

The various patent lawsuits against Vonage have been a perfect example of almost everything that's wrong with the patent system. Vonage was the clear leader in this space -- being the first to successfully get this type of product to a widespread audience, even as the idea had been talked for years. Vonage's success had nothing to do with its technology acumen. The concepts behind VoIP services were widely known and widely discussed. The problem facing the space had always been an inability by any company to package it up in a way that people would buy it. Vonage figured that out. And for it, it got sued into oblivion by all the companies who were unable or unwilling to figure out. Just the fact that there were so many patents covering the basic concepts of "VoIP" (even when there was so much prior art) should have been a warning sign that perhaps most of those patents were bogus. However, once Vonage's investors started pressuring Vonage to just settle the cases, things only got worse. Vonage settled with Verizon and Sprint and even with some small patent holder very few people had heard of. With Vonage quickly trying to settle any such lawsuit, you can bet that plenty of companies went hunting through their patent portfolios, looking to see if they had anything related to VoIP which they could use to sue Vonage over. AT&T quickly found something and sued Vonage, knowing the company would quickly cough up some money. And, cough it up, it did. Vonage has agreed to pay AT&T $39 million. Anyone else have a VoIP patent? Might as well sue while Vonage's wallet is wide open...

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...

If you can't beat 'em, sue 'em for patent infringement. That seems to be the lesson that various telcos have learned in dealing with Vonage. Having seen Verizon and Sprint win big awards for patent infringement against Vonage, AT&T has now sued the company for patent infringement as well. The story, once again, is exactly the same. AT&T tried, and failed, to compete with Vonage in the marketplace. So now that they've lost, they've sued. It has nothing to do with Vonage "stealing" any technology. The technology behind VoIP is fairly straightforward. Perhaps that's why it seems like everyone claims to have VoIP patents. At this point, it's just ridiculous piling on against the first company that actually figured out how to market a VoIP telephone replacement service by a bunch of telcos who refused to innovate.

Just a few days after settling with Sprint over a patent dispute, Vonage has also settled a patent dispute with a small company called Klausner Technologies. It looks like Vonage is really trying to clear the decks of these pesky patent lawsuits -- which still seem rather petty and against the purpose of the patent system. However, it doesn't look like Vonage is anywhere close to settling in its other big patent lawsuit battle. Instead, it's asking the courts to rehear its patent case against Verizon. This really is a shame. While Vonage has faced a variety of struggles on the business front, it was the company that was able to bring VoIP to the consumer market in a way that no other company was willing to do. It's unfortunate that rather than being able to take the service and the company to the next level, it now has to spend so much time and money battling over patents. The technology behind VoIP was nothing special. People had talked about if for ages. What held back VoIP was having the bandwidth to support it and a convincing marketing campaign that showed how easy it was to switch to VoIP while making it seamless with an existing phone system. Vonage was the ones to innovate here -- and now they need to pay up over a bunch of bogus patents.

Just a couple weeks after losing yet another patent lawsuit, Vonage has decided to settle its patent lawsuit with Sprint, agreeing to pay $80 million, covering both past and future licensing costs. The company is still fighting over Verizon's questionable patents. Again, it seems pretty silly that the company that actually figured out how to bring phone-based VoIP to the market in a way that people wanted now has to pay the incumbents who were unable (or unwilling) to do so. Of course, there's also been lots of talk that these patent lawsuits were really an attempt by the telcos to crush Vonage to the point where it was an easy buyout target. Thus, settling with Sprint, could open up the possibility of a Sprint purchase... but it probably would have just made more sense to do the buyout first before "settling," as the news of the settlement has sent Vonage's stock soaring. Based on that, don't be too surprised if Vonage reaches a bit deeper into its dwindling cash reserves to to pay off Verizon as well -- the resulting stock bump could effectively pay for the licensing fees. All in all, though, it does highlight how silly the patent system has become. The uncertainty over the suits hurts a company's stock and pushes companies to settle, even if they shouldn't. That's exactly what happened with RIM and NTP, and it looks like what happened here.

Vonage is not having a very good week. Just after a jury sided with Sprint over Vonage in a patent dispute, the appeals court has affirmed the injunction against Vonage from the similar Verizon patent case that was decided earlier this year. The only small victory for Vonage is that the appeals court sent back the ruling on one of the three patents in question. Vonage is claiming that the ruling barely matters, since it's already developed a workaround for the other two patents. Of course, that's what they say -- not what Verizon or the courts have said. And, it still seems likely that Vonage is going to need to pay out quite a bit in terms of damages for the patents the court affirmed. Again, the point still stands from yesterday. Despite the court's rulings, these patents are highly questionable, with a tremendous amount of prior art. Even if you take as a given that the patents are valid, they had nothing to do with Vonage's success -- which was based on figuring out the right marketing and business models to attract users, not on the same technology that was obvious to everyone in the space. The telcos who are now suing Vonage couldn't (or didn't want to) figure out this model in order to protect their legacy voice business. To now force Vonage to pay those companies when it was the one who actually innovated shows the travesty of the current patent system.