Vonage Hangs Tough

The aftershocks of last week’s Verizon court victory over Vonage are still being felt throughout the VoIP industry.

 

Last week, a federal court found that has found that Vonage Holdings Corp. infringed on three key patents owned by Verizon Communications, Inc.

 

An eight-member jury found that Vonage must pay Verizon $58 million in past damages. The jury also declared that Vonage must pay a 5.5 percent royalty rate on any sales going forward.

 

Immediately after the verdict was issued, Verizon requested an injunction that would prevent Vonage from using the technologies covered by the patents.

 

Jan Dawson, VP of the U.S. Enterprise Practice of Ovum believes the lawsuit and the subsequent request for an injunction are designed with an end goal of shutting the Holmdel, NJ-based Vonage down.

 

According to Dawson, “Verizon is asking for an injunction which will effectively close Vonage down, so if that goes through, it would affect any other VoIP provider that has the same technology,” said Dawson.

 

“This case could have a ripple effect across the whole VoIP market. There are lots of other, smaller players who stand to be hit,” he went on, citing in particular 8x8 Inc., the company behind the Packet8 Broadband Phone Service, and SunRocket, Inc., which operates the SunRocket Internet Phone Service. “They are competitors to Vonage and are in line to be affected,” said Dawson.

 

Huw Rees is Vice President of Marketing & Sales at 8x8, parent company of the Packet8 Internet phone service. “Unfortunately, the U.S. jury ruling in favor of Verizon’s patent infringement claims ultimately affects consumers, as large telcos continue to seek out ways to thwart the availability of lower priced, competitive VoIP phone services,” said Rees. “That being said, 8x8 is confident in the defense of its own proprietary technology which has been awarded 66 U.S. patents and remains at the core of our Packet8 residential and business Internet phone service.”

 

TMC president Rich Tehrani moderated a panel last week at the Voice Peering Forum, and asked representatives from Packet8 and SunRocket their thoughts on the outcome of the lawsuit. According to Rich’s blog, “…the two company representatives said they both think they are not in the same position as Vonage and these patents do not apply to them. They also said there are likely other providers who are going to be liable.”

 

Rich also mentioned that attendees at his session “…seemed to think that many service providers will have to raise prices to compensate for the ‘Verizon tax.’”

 

In another blog entry, Rich poses the question, “how is the consumer benefiting from this lawsuit?” Rich believes that the large carriers are using their wealth and legal might to stifle creative and innovative companies, and he laments the fact that this is a sure sign pointing to the fact that “The United States of America is the third world of telecom.”

 

For their part, Vonage issued a statement following the jury’s decision stating their belief that the company would not be adversely affected by the ruling.

 

In fact, according to the company statement, Vonage “expressed the utmost confidence in the following:”

 

 

And, in case it wasn’t completely clear, Vonage chairman and chief strategist Jeffrey R. Citron reiterated the sentiment. “We are confident in Vonage’s future health, growth prospects, and longevity,” Citron said.

 

It remains to be seen what will happen. A judge is set to rule on March 23 whether Verizon’s injunction request will be granted.