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...
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Filed Under: patents
Companies: at&t, verizon, vonage

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  1. identicon
    nate gaikwad, 29 Oct 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
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    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.

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