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Vonage Loses VoIP Case With Verizon

Posted by CowboyNeal on Thu Mar 08, 2007 06:45 PM
from the time-to-pony-up dept.
Government The Courts Patents The Almighty Buck News
cdrudge writes "A federal jury on Thursday said Vonage Holdings Corp. violated 3 of 5 patents of Verizon Communications Inc. and ordered the upstart Internet-phone company to pay $58m in damages as well as 5.5% in royalty fees per month per customer. Verizon said it would seek an injunction to block Vonage from using its patented technology. The jury did reject Verizon's claim of $200m in damages and that Vonage deliberately violated Verizon's patents. As you might expect, Vonage said it would appeal the decision and seek a stay if an injunction is granted. Judge Claude Hilton set a hearing for March 23 on whether to grant an injunction."
+ -
story

Related Stories

[+] Vonage Signs Deal to Escape Patent Infringement 60 comments
Tone Def writes "In the wake of a court injunction barring Vonage from infringing on three Verizon patents, the VoIP provider has signed an agreement with VoIP, Inc. to carry all Vonage calls over its network. Two of the Verizon patents Vonage was found to have infringed covered connecting VoIP calls to switched networks, so the agreement means Vonage is no longer infringing those patents. 'By signing the agreement with VoIP, Inc., Vonage has provided itself with a measure of protection against the injunction. VoIP, Inc. owns its own network, describing VOICEONE as the "first, seamless nationwide IP network." Perhaps most crucially from Vonage's standpoint, VoIP, Inc. claims to own the intellectual property around its network and services.'"
[+] The End for Vonage? 296 comments
TheRealSCA writes "The latest in Verizon vs. Vonage is in. The judge has basically stopped Vonage from accepting new customers. From the article: 'A judge issued an injunction Friday that effectively bars Internet phone carrier Vonage from signing up new customers as punishment for infringing on patents held by Verizon. Vonage's lawyers said the compromise injunction posted by U.S District Judge Hilton is almost as devastating as an injunction that would have affected Vonage's 2.2 million existing customers. "It's the difference of cutting off oxygen as opposed to the bullet in the head," Vonage lawyer Roger Warin said.'"
[+] Technology: Vonage Allowed to Sign New Customers 47 comments
terrymr writes "The Court of Appeals for the federal circuit has stayed the injunction against Vonage pending their appeal." The appeals judge agreed with Vonage's argument that the amount of consumer churn that Vonage or any telco suffers from would surely mean disaster for their bottom line, were they denied an influx of new customers.
[+] Technology: Vonage Admits They Have No Workaround 345 comments
drachenfyre writes "It looks like Vonage has no workaround for their recent patent infringements. This means if a permanent stay isn't granted it is likely that it will be the end of the line for Vonage. What will happen if millions of phone customers suddenly lose their service? Their own filing to the court stated 'While Vonage has studied methods for designing around the patents, removal of the allegedly infringing technology, if even feasible, could take many months to fully study and implement.'"
[+] Prior Art On Verizon Patents 170 comments
greenbird sends in word that Techdirt has up information from Daniel Berninger documenting prior art in the Verizon patents being used to destroy Vonage. "...due to the fun way the patent system works, introducing that kind of prior art to the USPTO for it to review the validity of Verizon's VoIP patents will take quite a bit of time and effort — much longer than Vonage has to fight Verizon in court." From Berninger's note: "In particular, the claims in both patents were anticipated by open standards assembled by the VoIP Forum (H.323) in 1996 and published in January 1997 with the participation of members from Cisco Systems, Microsoft, IBM, Nortel, Intel, Motorola, Lucent, and VocalTec Communications, among others... The Eric Voit patent applications reflect, in particular, contributions made by VocalTec Communication to the VoIP Forum during 1996 and formally published at the same time as a separate document."
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  • Guess I'll hold off on switching to Vonage for a little bit longer...

    • Re: (Score:3, Interesting)

      by MightyYar (622222)
      I was actually thinking in the opposite direction - I might just get rid of my Verizon DSL to vote with my dollars. The cable company offers Cable/Internet/Phone for $99. I have Vonage currently, and I like it a lot. I hope this doesn't kill them off.

          • Re:Hmmm... (Score:5, Informative)

            by ximenes (10) <slash.skuhn@neverb[ ]com ['ox.' in gap]> on Thursday March 08 2007, @07:06PM (#18283454) Homepage
            Vonage has two plans, unlimited is $25 and 500 minutes is $14. The instant they introduced the 500 minute plan I switched down to it. This includes all of the services (voicemail in particular) that you pay through the nose for with a real phone company.

            I cannot even conceive of using 500 minutes in a single month.

            • Re:Hmmm... (Score:5, Funny)

              by vux984 (928602) on Thursday March 08 2007, @07:36PM (#18283738)
              I cannot even conceive of using 500 minutes in a single month.

              Spoken like a true /.er ;)

              20 whole minutes on the phone per day? Unthinkable, why would the guy I order pizza from need to talk to me anywhere near that much?

              And really, who else do we call?

              • Re:Hmmm... (Score:4, Informative)

                by pdhenry (671887) on Thursday March 08 2007, @08:03PM (#18283982)
                1) incoming calls don't come out the the 500 bucket.
                2) calls to toll free numbers don't come out of the 500 bucket.
                3) calls to Vonage customers don't come out of the 500 bucket.

                It's harder to burn through 500 Vonage minutes than one would think.

                  • Re: (Score:3, Informative)

                    by JPriest (547211)
                    I am in the same boat you are, we go over our 500 minutes every few months, but I have not upgraded the plan becasue it is never costs much more than a few dollars. Anything up to 255 minutes over (755 total) is still cheaper on the $15 plan.


                    When I first signed up for Vonage I bought a $200 multi-cordless phone system (Current model is Uniden TRU9485-3) that is pretty nice, but at the same time I have saved about $1,400 since moving to Vonage.

            • >> I cannot even conceive of using 500 minutes in a single month.

              Hmm, so you don't have teenage daughters, then?

              (Sorry, this is Slashdot. Slashdotter's are not supposed to have girlfriends or wives, therefore children [at least living with them] are relatively unlikly. Silly me)

          • Currently, I don't use VOIP but that's only because I have a cell phone and paying for two seemed kind of silly.

            I hear a lot of people say to just use a cell phone as their main line, and I've got a cell phone with 1400 minutes a month shared between my wife and I, but what do you give out as your "home phone number" when people ask for it if you're married? Plus I can only have one cell phone extension per number so I'd have to remember to carry around my cell phone when I go upstairs or I'll miss a call

            • Re: (Score:3, Interesting)

              by hazem (472289)
              It clearly doesn't work for everyone.

              But, why should you and your wife necessarily have the same number?

              And you've presented an interesting opportunity for a new kind of device. It could be a home docking-station/wireless base for a cell phone. You plug it in and any incoming calls would automatically be handled through a cordless phone system. You can then put your cordless phones wherever you want them. Maybe it could take multiple phones and would use a different ring per phone. If it were really sm
      • Vonage is ok in terms of quality and rates. Only problem I had was my cable modem would "mysteriously" lose sync during the middle of any long calls. (no it wasn't overheating). I can't blame Vonage for that since it's my ISP which sucked. Oddly enough my ISP (Rogers) offers a competing [more expensive] VoIP service which doesn't offer the same features as Vonage (like free long distance).

        Geez, I wonder ... hmm ...

        Fortunately, I rarely call anyone [yeah, being a loner has its advantages]. And once I qu

      • I really don't know why anyone would go with Vonage to begin with. There are other options that are cheaper, better audio quality, demand lower bandwidth and provide a greater free calling area with significantly reduced international calling rates.

        Like who? I pay about $30 a month for the unlimited service after taxes and charges and I get reliable service. How much more could I ask for? When I pick up the phone I want to hear a dial tone not "Your $6.95/month VOIP Provider is not available, try again l

        • I've been using http://galaxyvoice.com/ [galaxyvoice.com] - $0/month plus $0.023/minute is pretty damn good, especially with a reliability level of "it's always just worked".

          • Re:Hmmm... (Score:5, Informative)

            by NormalVisual (565491) on Thursday March 08 2007, @10:05PM (#18285078)
            I'm paying a comparable amount through Vitelity [vitelity.net] and I've been quite happy with the service. $1.49/mo. for each DID, 1.39 cents/min/channel outbound, and 1.1 cents/min/channel inbound. It's very much an ala carte service - you can order as many DIDs as you want for a single account, and if you want CNAM lookups (caller ID), you pay for them on a per-use basis (something like 2 cents/lookup IIRC). Most importantly for me, they actively support and welcome customers running their own PBX boxes (Asterisk , etc.) and they will let you have as many simultaneously active calls as your bandwidth will support.

            I've had no problems with the service, and they were very helpful in porting my previous Vonage number over. They do offer a few other plans, but the ala carte offering worked best for me.

  • Woohoo! (Score:5, Funny)

    by SpiffyMarc (590301) on Thursday March 08 2007, @06:48PM (#18283254)
    Another win for the little guy! It's always nice when the system works.
    • Create debt. Maintain debt. Keep people in debt. Work them until they die of debt.

      How does this judgement affect the greater system?
      • Well, you see, this one group of rich guys tried to screw over this other group of rich guys, but the second group of rich guys was like, "Oh no you didn't!" and the first group was like "What're you gonna do about it!" and then the jury said "We find in favor of the rich guys!"

        So you see, EVERYTHING is different now. Duh.
        • I don't often see these things as groups of rich guys trying to screw each other over. Usually these things are a sign of rich guys meeting on the golf course and saying,"You know, if we make it look like we're at each other's throats, then we could slowly and carefully raise the monthly rates on the millions of investing idiots who take the news at face value every morning."

          Which group of rich guys did this benefit? Even rich guys stratify. Usually the stratification of rich guys gives insight into upco
      • It's worse than that, the very money you use is based upon you being in debt.
    • Sorry, when did our justice system become about helping the little guy? Even little guys can do Bad Things last time I checked.
    • I just don't understand. Maybe I need to read the patents and look @ the filing dates

      Isn't there prior art? I remember using Intel Internet Phone back in 1996. It was VOIP but it used email addresses or IP addresses to connect and didn't go to landlines phone handsets, but really isn't it obviously the next step, that and use phone numbers instead if IPs (I used IPs). And it was free.
  • "Patents encourage and protect innovations that benefit consumers, create jobs, and keep the economy growing," said John Thorne, Verizon deputy general counsel, in a statement. Yeah, for whatever company holds the patents. Using this same logic, wouldn't it help everyone a whole lot more if whatever technologies that are patented were allowed to be used by anyone? I hate patents.
  • I'm hopeing a company(Vonage) dropped alot of cash in political coffers. Not that I'm a care about that particular company, but this might be big enough to be the catalyst for serious patent reform that we so need.
  • How can vonage claim patents on connecting things to the phone network ? Of course the TFA might be oversimplifying a bit.

  • 5.5% per customer?? (Score:5, Funny)

    by honkycat (249849) on Thursday March 08 2007, @07:06PM (#18283452) Homepage Journal

    as well as 5.5% in royalty fees per month per customer
    Hope they don't have more than 18 customers or that's more than 100%!!

  • Larger VOIP Implications (Score:5, Insightful)

    by QuebecNerd (924754) on Thursday March 08 2007, @07:06PM (#18283464)
    I read a few articles on that news this afternoon but they are mainly aimed at the financial aspect of the story. I'm still trying to find what exactly are those patents and what are the larger (if any) implications for VOIP in general. Open Source Software like Asterisk could eventually suffer if Verizon begins a patent war and Vonage was only this first victim.

    Traditional carrier are having a hard time adjusting to new technology and they will try anything to keep their old ways to stay relevant. During the last few years this happened in many 'traditional' sectors, music and movies being two of them. In the long run, they will adjust or die but for now all of those dinosaurs are desperate to keep their heads above the water. The crippled patent system is their flotation device...

    This quote is from CNN's article on the subject coming from a Verizon lawyer:

    "Patents encourage and protect innovations that benefit consumers, create jobs, and keep the economy growing. Verizon's innovations are central to its strategy of building the best communications networks in the world,"

    Enough said!

  • Right... (Score:3, Interesting)

    by tomstdenis (446163) <.moc.liamg. .ta. .sinedtsmot.> on Thursday March 08 2007, @07:14PM (#18283532) Homepage
    "Patents encourage and protect innovations that benefit consumers, create jobs, and keep the economy growing," said John Thorne, Verizon deputy general counsel, in a statement. "Verizon's innovations are central to its strategy of building the best communications networks in the world."

    So they want to put Vonage out of business to .. um ... keep the economy going and create jobs? Why not just do the sensible thing [sadly in this case] and either buy out Vonage, or license the patents to them.

    Though, the idea of "phone calls over the net" isn't exactly non-obvious or new. It would have been nice if the article could cite the patents they are violating....

    Oh well..
    • Why not just do the sensible thing [sadly in this case] and either buy out Vonage, or license the patents to them.

      For the same reason that the ??AA companies don't just buy out other companies that are making use of their content: those companies threaten their entire archaic business model and force them to make costly changes to their infrastructure that they otherwise would be able to put off for years or even decades. It's far cheaper to sue another company to put them out of business than it is to bu
      • Well we're not talking media. Your argument would make sense if the mafiaa went after legit billable distribution systems (which they do... oddly enough).

        I really don't get why this is so complicated though. We have everything we need to do net-2-net calls, in portable nice interoperable fashions. I don't know why we bother with phone numbers [in the way they're used] anymore. Everyone should just have a 10 digit number which is their phone number. Dish them out like you would IP addresses so you can r

  • Good example of the patent system (Score:5, Insightful)

    by cgenman (325138) on Thursday March 08 2007, @07:15PM (#18283538) Homepage
    Ideal:
    Person A has a brilliant, rare idea. Person A invests years in refining and expanding said idea. Person A goes out and patents said idea. Person A opens a business with said idea, reaping customer praise and financial reward.

    The patent has encouraged creativity and expanded the market.

    Reality:
    Person A has a somewhat obvious idea. Companys B, C, D, and E without investing in refining or developing the idea run out and patent said idea. Patent is granted to Company B (and sometimes C,D,and E too). Company B sits on patent, preventing anyone else from opening said business in order to protect the large profit margins on their current offering. 15 years later Company B sells the rights to said patent to Clearinghouse F. Clearinghouse F takes the broadest possible view of said patent, and sues everyone in the business. Years of fun in courthouse G ensues.

    The patent has prevented the use of the idea or object patented, and has been used to bleed money from companies who do produce things.

  • 5.5% in royalty fees per month per customer? (Score:4, Interesting)

    by r_jensen11 (598210) on Thursday March 08 2007, @07:25PM (#18283614)
    How is Vonage supposed to have any revenues if an injunction is imposed? I suppose they could write some new code that doesn't infringe on the patent, but how would Verizon have any claim to the revenues?

      • 5.5% is a drop in the bucket when overhead is low and you're stealing someone else's R&D.

        5.5% is *never* a drop in the bucket. That's a business-killer even if you're selling stolen cars to people who want to over-pay in a world with no cops.

        But... back in the real world... 5.5% is a huge hit to a company that did its own R&D and later found out that someone else went and got the government granted monopoly to the obvious ideas they were using first.

  • I don't get it..

    i havent seen any stories about any cases of good old fashioned "jury nullification" since the civil rights era when it was used to protect racist groups and institutions...

    i don't get it.. it's ok to use jury nullification to beat up on african americans but its not to tell a near monopoly "no, we won't allow you to destroy one of your very few competitors"?

    I think we need to start a new biggotry movement that somehow involves monopolistic patent trolls.. then we'll see some action.
  • The article claims that Vonage was in violation of "3 out of 5" patents owned by Verizon, but does not list any information about the actual patents except to claim that they dealt with call waiting and voicemail. I did a little research and was unable to find any reference to these patent numbers. Does anyone have any more information on the patents or their actual numbers or the court filings?
  • Why is Vonage taking the flame for VOIP? Isn't there other buisnesses out there that allow people to use the public phone lines for comunication from computer to phone. I use skype which does not have a monthly payment(12 months for $24 for an phone number and voicemail)and 2 cents a minute for calls made in the US. Also, I do enjoy the video phone functionality of it.

  • RIP VoIP (Score:4, Insightful)

    by ShawnDoc (572959) on Thursday March 08 2007, @08:42PM (#18284372) Homepage
    This is essentially the end of VoIP if this decision holds. Basically, Verizon claims patents on connecting a VoIP line to a PSTN line and on common billing methods for phone service. Verizon was the first one they went after because they are the most high profile. Expect them to leverage this victory to take on anyone else offer VoIP to PSTN service.

  • Verizon Killed the VoIP Star (Score:3, Insightful)

    by Doc Ruby (173196) on Thursday March 08 2007, @08:44PM (#18284394) Homepage Journal
    With this decision, Verizon has just derailed the horde of VoIP startup/conversion trains rolling down the tracks into the future. I picture a caped, curly-mustached Verizon villain with a box and plunger detonating a high bridge made of glass fiber.

  • Prior Art: Free World Dialup, MSN Messenger? (Score:4, Informative)

    by Cocoshimmy (933014) on Thursday March 08 2007, @10:42PM (#18285320)
    The patents in question seem to have claim to have invented VOIP in 1999. However, the free world dialup project has been around since 1995 [freeworlddialup.com]. Also, back in 1998-1999 I remember Microsoft was offering free PC-Phone calls to the US using MSN Messenger. Their partner was charging for the same service. I think that would certainly qualify as prior art.

    • Re:Prior Art: Free World Dialup, MSN Messenger? (Score:5, Informative)

      by Cocoshimmy (933014) on Friday March 09 2007, @04:25AM (#18286856)
      I don't know why my parent post got modded as a troll as they are all valid points. Perhaps I did not cite my references.

      As someone mentioned earlier, here are the patent numbers: 6137869 [billing algorithm for voip], 6104711 [dns for voip],6282574 [dns for voip], 6298062 [conversion of PSTN signals to IP packets and providing PSTN services over IP networks], 6359880 [Wireless VOIP router]. I am not going to link these to the patent office because it's tedious, but you can look them up for yourself.

      Net2Phone, launched their VOIP services back in 1997 [net2phone.com]. In order to establish said services they implemented most if not all of the above claimed patents and did so before most of the patent applications were filed. The only two which were filed before the service was launched were the first two patents in the above list and they are certainly not unique and unobvious. Billing for VOIP services? Pretty obvious since they announced their pay service in 1995 which was 2 years prior to the patent application. The second one was simply DNS extended to provide things like caller ID. Not exactly ground breaking but this is perhaps the only leverage they may have IF nobody else was providing VOIP services at the time or prior to. That is a big IF because it is likely many of the telcos were already using something similar for digital cell phone networks such as GSM (which is also a packet network created around 1993).

      Of course there is also the Network Voice Protocol [wikipedia.org] which was the first implementation of VOIP invented in 1973 which preceded all the patents. My point is, they really don't have much of a case with these patents.

    • Re:Vonage is fucked.. (Score:4, Insightful)

      by terrymr (316118) <.terrymr. .at. .gmail.com.> on Thursday March 08 2007, @07:31PM (#18283672)
      they have the worst customer support (Bob aka Habib in India),

      Ah - you've never been a verizon customer then.

      Constant overbilling, random shut offs of additional services, fees to reinstate the randomly shut off aditional services, $3000 cell phone bills because they accidentally deleted your voice plan from your cellphone account, $2000 data bills because they accidentally deleted the data plan from your blackberry.

      • I have been a Verizon customer for years.
        I have only had 2 problems with them.
        The first one, they came out spent 4 hours going over my IN HOUSE wiring and helped solve an issue...NO CHARGE.

        The second one involved an email issue, which was solved in under an hour.

        Plus, while I was under a contract for my DSL, the change my price from 29.95 to 14.95. No change in service. That was over a year ago and it's still 14.95

        I have never had a problem with my Verizon cell service.

    • Re: (Score:3, Insightful)

      by marvinglenn (195135)

      Vonage's businss model depends on Verizon, SBC and the other existing phone companies. It depends on utilization of their facilities without paying anything for the use.

      I call bullshit.

      Vonage doesn't pay for the line, the customer of both Vonage and the ISP pays for the line. If the ISP isn't getting what they think they should get for the traffic, they should jack the rate to their actual customer... the person with the DSL or Cable connection.

      The user pays the ISP to get to Vonage, not the other way aro

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