Vonage lawsuits

Posted on September 26, 2007
Filed Under Technology |

Vonage’s share dipped to 93-cents, its lowest value since the company went public in May 2006. Vonage has been charged with the violations of three Verizon Communications Corp. patents in building its Internet phone system. The lawsuit awarded Verizon with $58-million (U.S.) in damages, plus 5.5-percent royalties on future Vonage revenues.

Reminder this was just two days after Vonage was ordered to pay Sprint Nextel $69.5-million in damages, after a jury found that Vonage willfully infringed on six Sprint telecommunications patents.The U.S. Court of Appeals for the Fourth Circuit directed the trial court to reconsider the verdict on one of the three patents, and it vacated the damages and royalty awards. They were vacated because the lower court did not specify which portion of the damages were corresponding to which patent. The appeals court found that the district court improperly created the third patent - wireless access to Voice over Internet Protocol (VoIP) service.

As of now, the injunctions are pending on resolution of Vonage’s appeal. Unless Vonage now obtains an emergency stay from the U.S. Supreme Court, the injunction will go into effect within a month.

Vonage said it does not expect the decision to have an adverse effect on its business, because it has deployed workarounds for the two patents in question for some time.

Sure I do support the use of patents to encourage technological innovations, but I do find it unfortunate that monopolistic companies use these patents in a way to drive out competition in the marketplace. Can the patent system be furthered enhanced to prevent such uncompetitive behaviour?

There’s a huge problem with this system. If nothing is done about it, we will see fewer innovation, no competition, and higher prices for basic services.

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