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...

For many years, states have been trying to tax VoIP providers as if they were telcos. From the states' perspective, they were using a "quacks like a duck" test, whereby any phone service that acted like a traditional phone service should get taxed like a traditional phone service. Since states rely on tax dollars so much, this feeling was reinforced as people started ditching landline phone service for VoIP providers. However, there are a few problems with this. The reason that telcos are taxed is because of the structure of the telephone system, and the fact that the government more or less handed over rights of way and control of the system to private companies. VoIP providers, however, have the calls travel over the internet, changing the nature of the equation, and meaning that most of the reasons for taxing telcos shouldn't apply. Shouldn't, except for politicians who can't see beyond the money. Yet, taxing VoIP is a doubly bad idea, because VoIP is still an emerging service that is rapidly changing -- offering new services and opportunities that weren't possible on landline offerings. Putting a tax on it could kill a lot of that innovation. Too many states don't see that.

Jeff Pulver is showing the contrast between two states in dealing with VoIP regulatory issues. New Jersey has passed a law saying that it will not regulate VoIP, noting "The proliferation of new technologies and applications and the growth in the number of providers developing and offering innovative services using Internet Protocol is due in large part to a light regulatory touch, including freedom from traditional telephone regulation that these new technologies and services and the companies that offer them have enjoyed in New Jersey.... These economic benefits, including consumer choice, new jobs, and significant capital investment, will be jeopardized and competition minimized by the imposition of traditional State entry and rate regulation on Voice over Internet Protocol service and Internet protocol-enabled service."

Unfortunately, Missouri isn't quite so enlightened. Despite various rulings saying that VoIP should not be taxed, Missouri is trying to bend the rules to make at least some VoIP offerings (mainly those provided by cable companies) classified as telco services that need to be taxed. As Jeff notes, if this works, then expect other states to follow suit and create loopholes for taxing VoIP providers... and then watch as all VoIP related innovation happens elsewhere.

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.

Tom Evslin has a very interesting post looking back at the predictions he made keynoting Jeff Pulver's VON conference ten years ago, and noticing that of his three stages of the VoIP adoption path, the third never happened. Evslin predicted that the first area of VoIP adoption would be the straight arbitrage play of offering cheaper calls on the backend, especially for international calls. That absolutely happened. The second stage of VoIP adoption would be to move the calls to the internet, rather than a separate IP network for VoIP calls. That also happened. The third stage, however, would be when VoIP offerings became more common because they allowed people to do things they simply could not do with the traditional POTS (plain old telephone system) offering. That's always the definition of a true killer app. It's not about moving one service from one system to another, or about just making something cheaper or better. It's about enabling something that wasn't even possible before. Yet, Evslin notes, this hasn't really happened with VoIP. Instead, most VoIP plays are still quite similar to the telephone. Evslin thinks that, in retrospect, his mistake was in forgetting that the new VoIP offerings needed to remain backwards compatible with POTS, and that has limited the ability to really create new offerings.

Instead, he believes the real third stage of VoIP adoption will be to totally bypass POTS and make it obsolete. He notes that social networking communication systems are starting down that route, where there are many different ways of communicating -- and voice will just slot right in as one of many modes of conversing (along with videos, text, pictures and other options). I'd argue that this isn't that far off from his original vision -- and he seems to downplay things like Skype, GizmoProject and Yahoo IM that really have started to allow people to do things that weren't possible before, such as adding presence and mobility to VoIP, while still connecting back to the legacy POTS system. I'd also argue that a second issue holding back the adoption of cool new features and benefits from VoIP has been the ridiculous patent lawsuits from the incumbents, trying to halt any real innovation in the space to protect their cash cows. Perhaps Evslin's right that the only way to get around these things is to leave POTS in the dust -- but hopefully once the dust clears on these patent lawsuits, real innovation can start happening.

Over the weekend, a story out of the UK began to get some buzz, when an American FAA representative supposedly told a British newspaper that the FAA will not approve in-flight mobile phone calls after the agency received a ton of complaints when it publicly began considering the shift in policy. Of course, this is somewhat meaningless, because the FCC had already said no to the change in policy, and both agencies would likely need to agree before any change went into effect. So, for those of you (and we know there are lots of you) who were terrified by the idea that you might get stuck sitting next to someone jabbering away into a mobile phone for a cross-continent flight... rest easy. Well, rest easy until you realize that voice is just a form of data, and it's only a matter of time until internet access in the sky means the person sitting next you will be jabbering away via Skype for a cross-continent flight no matter what gov't agencies have to say about mobile phones in the sky.

Vonage has already had enough trouble actually making their business profitable without having to worry about a barrage of patent lawsuits over highly questionable patents. But thanks to a patent system that approves a tremendous number of overly broad patents on obvious ideas, that's what you get. Already appealing a similar case from Verizon, a jury has found Vonage guilty of violating a bunch of Sprint patents. Juries will often find in favor of the patent holder, so this isn't much of a surprise. Vonage will most certainly appeal and the case is far from over. However, given how much effort the company needs to put into fighting these patents, the company may not be able to survive. The really sad thing is that the technology behind VoIP has almost nothing to do with Vonage's success. There were a ton of companies that had tried and failed to make popular VoIP plays before (and after) Vonage. What Vonage did was actually innovate: taking the basic idea that everyone knew about, and turning it into an offering that people wanted to buy. That's where Verizon, Sprint and other incumbents failed. For them to come back afterwards, and claim patent infringement is simply sour grapes. They were unable (and unwilling) to create the services that people wanted -- and now they want to shut down the company that actually did innovate -- and they're likely to succeed. That's not how the patent system is supposed to work.

Already facing possible shutdown and huge fines from Verizon over some VoIP patents, Vonage is apparently facing a similar threat from Sprint as well. The case was filed nearly two years ago, but it finally is underway, with Sprint making the ridiculous claim that without Sprint's patents, Vonage wouldn't exist. We've already gone through this with Verizon, but there's a ton of prior art on VoIP offerings -- and almost all of these patents seem overly broad and quite speculative. Lots of different folks all figured out how VoIP could work at about the same time (suggesting that the concept was the natural progression of the technology, which isn't something that's supposed to receive patent protection). Vonage's real innovation was in figuring out how to package and market the service -- something that neither Sprint nor Verizon did. Both companies are now simply trying to shut down a rival who out-innovated them in the market. That's not what the patent system is designed to do, and it's a blatant abuse of the patent system by both telcos to claim that Vonage somehow "stole" anything from them.

VoIP provider SunRocket's troubles and subsequent collapse are well known, leading many to wonder if it's a warning sign for Vonage's prospects. Of course, Vonage (unwisely) decided to dance on SunRocket's grave, celebrating that it had caused SunRocket to go out of business. Perhaps they should have waited until SunRocket was really, totally dead. The whole taking credit for SunRocket's demise might come back to bite them as the ghost of SunRocket is now suing Vonage for emailing SunRocket's customer list. Apparently, the two companies had discussed, under a confidentiality agreement, Vonage buying SunRocket's customers or customer list, but talks never went very far. Soon afterwards Vonage emailed SunRocket's customers asking with an offer to move over to Vonage's service. The liquidation firm handling the SunRocket shutdown (incidentally, it's Marty, the dot com cleanup guy's firm) potentially saw this as an easy lawsuit to try to recover some cash for SunRocket, and sued Vonage for violating the confidentiality agreement. Vonage insists that it acquired the list legally, outside of the discussions with SunRocket. Neither party comes out of this looking very good, but that seems to be pretty typical in the independent VoIP space lately.

Vonage has been having a rough go of it lately, so apparently the company has to take whatever small victories it can. A spokesman for the company recently bragged that it was responsible for the demise of Sunrocket, the #2 independent VoIP operator. In a sense, the company is correct in that the cutthroat price competition in this space is what killed Sunrocket. But Vonage is struggling itself for the same reasons. From a business model perspective, there wasn't much of a difference between Vonage and Sunrocket, except that Vonage seemed to spend way more on advertising. By going out of its way to highlight Sunrocket's woes, the company is pretty much reminding everyone that it's in the exact same boat.