Vonage Hit With $69.5M Judgement

andy1307 writes "The Washington Post is reporting that Net telephone company Vonage Holdings Corp. was ordered in federal court Tuesday to pay Sprint Nextel $69.5 million in damages for infringing on six telecommunications patents owned by competitor Sprint Nextel Corp. In addition to the damages, jurors awarded Sprint Nextel a 5 percent royalty from Vonage on future revenues. It was the second verdict against Vonage this year. A jury in Virginia determined in March that Vonage had violated three Verizon patents in building its Internet phone system. The jury awarded Verizon $58 million in damages plus 5.5 percent royalties on future revenues. Greg Gorbatenko, a telecommunications and media analyst for Jackson Securities, said the decision 'feels like a death knell' for Vonage because future revenue will likely dry up, preventing the company from investing in better technology or improving customer service."

And so, the incumbent telcos smugly feel...

[by Anonymous Coward]

... they have destroyed VOIP as a threat, and they can go about their usual greedy, grasping ways. Sprint will raise a glass to Verizon and toast to their continued wealth.

But there will come a day when we will kick their corporate corpses and spit on them.

A perfect example of patents destroying innovation

[by Anonymous Coward]

This is a perfect example of how patents utterly destroy innovation.

Here we have Vonage, offering a novel and efficient solution to global communication. They're opening up new possibilities. Yet the incumbents dare not face true competition, so they quash this innovative burst of talent. And what do we get? Less innovation, and less economic efficiency.

Re:A perfect example of patents destroying innovat

[jelton (513109)]

This is a perfect example of how bad patent laws and poor bureaucratic administartion utterly destroy innovation.

Fixed for you.

Re:A perfect example of patents destroying innovat

[Dun Malg (230075)]

What are you talking about?! If someone invents something and is patent whoring it so nobody else can use it to compete, that CAUSES innovation not stomps it.

When the patent is something overly broad, along the lines of "sending telephone conversations over a packet switched network" (which is essentially what the Verizon/Sprint patents amount to) then it is stifling innovation.

If dialup and dsl technologies were perfectly open patents for everyone to use, we'd still be using them because companies would be stuck on "Wow that dialup service is awesome and everyone's getting it! Let's copy it!" With people paying royalties and getting permission to use those inventions, they just say screw it, we can do better and invent cable and fiber and microwave transmission etc.

Cable, fiber, and microwave as alternatives to dsl/dialup have bloody fuck-all to do with working around patents. You really think cable companies created DOCSIS because there were patents on (say) ATM DSL? If so, you're a fucking idiot. Cable companies created cable data protocols because their infrastructure is coax, not copper fucking pairs. I'm not even going to dignify the "fiber and microwave" bits with a response, as any half-intelligent fool knows that both technologies predate commercial dialup and DSL internet access by DECADES.

Re:And so, the incumbent telcos smugly feel...

[NeutronCowboy (896098)]

No, they don't feel that they have destroyed VOIP as a threat. They've destroyed someone who was using VOIP to threaten their monopoly. I'm sure that we'll see Sprint, Verizon and ATT provide VOIP at some point as a legitimate alternate to a landline. And to some extent, they already do. But there will never, ever be a new company that will rely on VOIP to become a legitimate telco competitor. Because before that company will become a legitimate competitor, the incumbents will have sued it into the ground. $100 million verdicts are tough for an incumbent, but not a deal-breaker. $100 million verdicts are death sentences for anyone trying to start a competitor.

The only day that we will kick their corporate corpses is if we get rid of stupid patents and actually enforce anti-trust regulations (note to the FCC: cable and satellite providers are no more competitors to ATT than pencils and markers are competitors to Bic). And I don't see that coming anytime soon.

Vonage was just more corporate evil.

[MikeFM (12491)]

I'd feel bad for Vonage except they already screwed me this year so I learned the hard way they were no less evil than any other phone company. I had been a customer of Vonage a year or so ago. I had several lines and had bought a couple decent phones to go with their service. I still have the boxes and receipts for these phones. I moved, switched jobs, etc and canceled my service until I'd gotten settled back in. When I go to turn my service back on I find out that they'd managed to leave one line subscribed. They swear up and down that there is no way I could have canceled my other lines without canceling that line unless I'd specified for that to happen. So if I want to get service back I'll have to pay the monthly fees and extra fees for that line before I can re-open my account. They never even sent me any kind of paper notice letting me know a line was still connected and going unpaid. Supposedly they emailed me the notice to my dead old work account and that I should have made sure they had an updated email address before I canceled my account. So fine, I argue with them for a while and get nowhere so I figure I'll just sign my wife up an account instead and worry about the fees later. No go - they lock the devices to individual users accounts. You can't switch them to another account even if you've previously disabled the phone from your account to add a different, more expensive, phone to your account. Okay this sucks - I check the packaging and none of the phones says anything about being locked to the vendor let alone to a specific account. The only note I have about this policy is a blurp that came with the original phone I got with my service and I'd assumed it'd only count for that phone as they gave me a discount off the price for signing up. The other phones I'd bought I couldn't get the discount because I was already a Vonage customer. Several hundred dollars down the drain with some nice VoIP phones I can no longer use at all and I chose not to open my wife a new account if I couldn't use the phones I'd already purchased.

This is ass stupid behavior from a company. I had been a loyal customer who frequently told people how good their service was. Now I tell them how much Vonage sucks and to beware their dishonest business practicies. Brilliant move. Giving me a $100 credit for service I didn't use would have got my business back for years to come.

Re:And so, the incumbent telcos smugly feel...

[by Anonymous Coward]

.. they have destroyed VOIP as a threat, and they can go about their usual greedy, grasping ways. Sprint will raise a glass to Verizon and toast to their continued wealth.

Gentlemen. . .to evil.

Damn...

[Cervantes (612861)]

Damn, I wish I'd remembered to patent "connecting phone calls over the internet" when I thought about it... oh, the first time I saw a microphone attached to a PC.
Seriously, 8 random people who aren't smart enough to get out of jury duty are considered smart enough to understand the fine points of patent law and internet telephony? And this is enough to cripple a (relatively) small startup company? Can someone remind me what Sprint/Nextel did with these oh-so-valuable patents, and what Vonage did that cost them tens of millions of dollars? Besides not paying sprint tens of millions of dollars, that is.

Re:Damn...

[by Anonymous Coward]

Well, speaking for myself, I flipped the telcos the bird (as hard as I could) and gave my dollars to Vonage instead for the past 3 years. Multiply that by however many other people who did the same, and it adds up to something.

The most disgusting part of all of this is that the telcos let the little guys take all the risks, prove and market the technology to the public, and show that there is a viable market for VoIP phone service. They they realized that they could squeeze more money out of consumers than Vonage et.al. were, but the only way to do that was put them out of business. I can't help but wonder if this is what our Founding Fathers(TM) had in mind when they envisioned the patent system.

Perhaps the most disheartening thing though, is the question: How many of the violated patents held by Sprint/Verizon are being infringed by the other under the blessing of cross licensing? I'd bet a big bag of money it's greater than zero.

Re:Damn...

[Adambomb (118938)]

who aren't smart enough to get out of jury duty

Now if only we were all smart enough to realize that this might be a source of our problems.

Re:Damn...

[drydirt (1161445)]

Now if only we were all smart enough to realize that this might be a source of our problems.

On the other hand, realistically, how could eight randomly chosen citizens with no experience in the telecommunications field possibly come to an educated decision? Isn't a trial of this nature really just going to come down to which lawyer has the most winning personality (or the best ability to "dumb it down" in a way a layperson can understand?)

I understand we as individuals are entitled to be tried by a jury of our peers, but when one multinational corporation is suing another are eight Kansas City residents really "peers?"

And no, I don't have a better alternative to suggest, but something is clearly broken here.

Investing in better technology?

[timeOday (582209)]

From a customer viewpoint, I like Vonage because it's cheaper than a local phone, but I can't say I've seen any particular improvement in the service for the three years that I've been a customer. It works fine. There are some features, such as separate voicemail boxes for family members, which I've waited in vain for all along. Instead they introduced speech-to-text but are charging extra for it. Totally automated services like that ought to be free add-ons to differentiate themselves from "old-fashioned" telephone and nickle-and-diming cellphone companies. I'm not sure what their long-term plan is. Simply bridging between the Internet and POTS can't be all that hard.

Re:Investing in better technology?

[greenbird (859670)]

I'm not sure what their long-term plan is. Simply bridging between the Internet and POTS can't be all that hard.

It is when the only way you can implement it is with the approval of and huge payoffs to the industry oligarchs that currently control telecommunications and who's market VoIP is undermining.

Re:Investing in better technology?

[techstar25 (556988)]

From a customer viewpoint, I like Vonage because it's cheaper than a local phone, but I can't say I've seen any particular improvement in the service for the three years that I've been a customer. It works fine.
That's the point. If they offer the identical service as my old phone company for $20/month less (ie. free long distance), then it's totally worth it.
Is Vonage cutting edge? No.
Are they innovating? No.
Can they save everybody at least $20/month on their phone bill? Yes.

i've seen this problem before.

[User 956 (568564)]

In addition to the damages, jurors awarded Sprint Nextel a 5 percent royalty from Vonage on future revenues.

The correct legal strategy here is, change their name to an unpronounceable symbol, and force everyone to call them "the telecommunications company formerly known as Vonage".

Absurd

[cdn-programmer (468978)]

This is utterly absurd.

In 1985 I worked out everything that was required to do this and in fact even went so far as to track down Dialog cards so I could interface a PC to a T1 line.

There is NOTHING required that is worthy of a patent. NOTHING at all. This is all a totally obvious idea and relatively easy to implement. In fact it is so obvious that when I started working on the project I never even considered that patents would be available.

I never finished that project. I was a single parent working at home and my kids at the time decided I should not be allowed to program. Alas.

Now of course we have projects like Asterisk and its quite mature.

So how does this ruling affect projects like Asterisk? (www.asterisk.org)

Are we banned from plugging a hand held device that contains both a speaker and a microphone into a computer now? Or are we banned from connecting the computer to the telco switch, which BTW is a computer.

Maybe we are banned from connecting a computer which is called a PC to a computer which is called a switch via a network which has been in common use for decades.

To the fellow who points out that people who are too dumb to get out of jury duty are put in charge of million dollar technical decisions which they cannot possibly understand.... yes. You are 100% correct and you make an excellent post.

Its clear that lawyers have managed to turn technical progress into a game of craps. IMHO this is something the public needs to be more aware of and somehow it would be nice if our pollies could be held accountable for the bad legislation they created. We really need to get patent business out of the computer business.

Re:Absurd

[Adambomb (118938)]

To the fellow who points out that people who are too dumb to get out of jury duty are put in charge of million dollar technical decisions which they cannot possibly understand.... yes. You are 100% correct and you make an excellent post.

Seriously though, why would ANYONE consider it smart to get out of jury duty when the decisions of the juries impacts case law like no other. Why is "Getting out of jury duty" considered smart? Yes, it is a hassle and there are opportunity costs involved, but think of the cost of ALL JURIES BEING RETARDED.

In fact, i think we may be seeing that cost all over the friggan place at the moment.

Because the jury selection process is corrupted.

[Ungrounded Lightning (62228)]

Seriously though, why would ANYONE consider it smart to get out of jury duty when the decisions of the juries impacts case law like no other. Why is "Getting out of jury duty" considered smart? Yes, it is a hassle and there are opportunity costs involved, but think of the cost of ALL JURIES BEING RETARDED.

Because the jury selection process has been corrupted to the point that anyone with any background in the subject in question, or an engineering background in general, will be deliberately excluded from the selection.

If I understand it correctly, this apparently started out to avoid having jury members bring into their deliberations any personal knowledge of information that is not in evidence (and thus was not subject to challenge by the litigating parties). But the net effect is to exclude exactly those people with the educational toolkit to make informed judgements on technical issues, rather than being led around by the rhetorical skills of the attorneys.

People with technical backgrounds are, in fact, excluded from most trials. The ability to reason logically is seen as a liability by both prosecuting and defending attorneys.

One result is that the panels finally selected are far from a statistical sample of the population - with a statistical bias that subverts the intent of the jury system - and thus justice - to an extreme degree.

The other result is that going through jury selection is, for most technical people (along with anybody with a strong political position, knowledge of guns or crime, etc.), a massive waste of time. They will almost never be selected.

= = = =

By the way: You won't find the phrase "jury of his peers" in the US legal system. This is because we're all supposed to be peers before the law. Thus you have no case if you, as an engineer, object to being tried by a jury that systematically excludes engineers and consists exclusively of people who are retired or on welfare.

Re:Because the jury selection process is corrupted

[MrDoh1 (906953)]

I was the foreman on a murder trial a few years ago.

After the trial, speaking with the defense and prosecutors, they both said they nearly excluded me, but both took a chance. They outright told me that they are afraid of people in technical, specifically IT related technical fields, serving on juries. They didn't really elaborate much but it was the general rule, not one just for this case.

I did convey to them that I believed that was wrong thinking on thier parts.

Hurray

[Scorchmon (305172)]

Well, on the bright side, we won't be having to hear anymore of that damn "Woohoo" song from their commercials.

Patents working as the corporations want

[Whuffo (1043790)]

Here's another example of what's wrong in this country. Patents, which were intended to increase innovation and development have been bent into a weapon that corporations can use to destroy any new competition.

We've got patents being issued on obvious / unpatentable ideas and they're being upheld by courts that appear to be working for the big corporations - maybe the judges are clueless or overworked, but decisions like this one don't make the legal system look good.

Jointly, the current giant telecom companies hold patents on everything up to and including transmitting a voice over a wire. Any inventor that comes up with a better or cheaper way to provide voice telephony service will receive the same treatment that Vonage did.

Who do you think you are???

[gillbates (106458)]

said the decision 'feels like a death knell' for Vonage because future revenue will likely dry up, preventing the company from investing in better technology or improving customer service."

Sharon, you must think we're a bunch of chumps. We didn't get to be big phone companies by being nice, you know. Better service and lower prices? Did you really think we'd let you get away with that little stunt?

Why do you think we pushed patents in the first place? Monopolies have always been about better profits, and never about better customer service or value. Quite charming that someone out there actually believes in such antiquated notions, really.

I believe, Sharon, you are just beginning to understand how a phone company is supposed to work. Better customer service? Hah! We're here to make a profit, and while your little charade was entertaining, it's high time you got on with being serious about being a phone company.

I mean, honestly, when was the last time one of your customers was on hold for more than a half hour before finally giving up? And you call yourselves a phone company...

Better technology? Are you serious? Why, that costs money, you know. Did you really believe our lawyers would let you get away with that?

After all, just who do you think we are?

How times change...

[ehinojosa (220524)]

It's really kind of ironic. Verizon bought out MCI, which was one of the first long distance companies that was able to circumvent the AT&T regulated monopoly. Their microwave towers were disrupting the existing market forces in much the same way that Vonage and VoIP in general has the potential to be. Now a company that only managed to get its start by being basically "a law firm with an antenna on the roof" is essentially using their army of lawyers to keep down their potential competitors.

Funny how that works.

Re:Thats too bad.

[Jerry Rivers (881171)]

"If you have a real phone line, then most of the big long distance companies offer an unlimited plan.
A quick check showed plans from AT&T, and MCI, were avaible."

Sure they do, but at more than double the price I pay Vonage.

Re:Which patents

[greenbird (859670)]

Does anyone know what techniques and technologies Vonage used that Sprint and/or Verizon own patents on?

A ZDNet analysis [zdnet.com] of the disputed Verizon patents 6,104,711 [uspto.gov], 6,282,574 [uspto.gov] and 6,359,880 [uspto.gov].

I haven't been able to find a list of the Sprint patents yet.