Vonage Loses VoIP Case With Verizon

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."

Comments

Woohoo!

[SpiffyMarc]

Another win for the little guy! It's always nice when the system works.

Re:The working system

[spun]

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.

5.5% per customer??

[honkycat]

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%!!

Re:Hmmm...

[ximenes]

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.

Larger VOIP Implications

[QuebecNerd]

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!

Re:What patents ?

[1310nm]

"The infringed patents cover a method for translating calls between an Internet network and the standard telephone network, call-waiting features and wireless fidelity, or Wi-Fi, handsets. Vonage was cleared of infringing two patents related to billing systems designed to prevent fraud."

http://www.bloomberg.com/apps/news?pid=20601087&si d=anDrCRkj4nn0&refer=home

Good example of the patent system

[cgenman]

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?

[r_jensen11]

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?

Re:5.5% in royalty fees per month per customer?

[Chandon Seldon]

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.

Re:Vonage is fucked..

[terrymr]

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.

Re:The working system

[hotdiggitydawg]

Well, if you do it right, it's based on your neighbour's debt.

Works for me - haven't had to pay for bandwidth in over a year ;-)

Re:Hmmm...

[vux984]

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:Sooo.. jury nullification went out with racism?

[XorNand]

Wow. Someone equating patent infringment to the struggles of civil rights movement--only on Slashdot. Jury nullification is only applicable in criminal cases. Vonage was not charged with a crime; ergo there was nothing to nullify. You might want to read up on the term before using it again.

Google patent search is your friend

[Ungrounded Lightning]

Maybe some of these?

Re:Hmmm...

[pdhenry]

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.

RIP VoIP

[ShawnDoc]

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.

Holy...crap...

[1310nm]

Look at these patents:

http://patft.uspto.gov/netacgi/nph-Parser?u=%2Fnet ahtml%2Fsrchnum.htm&Sect1=PTO1&Sect2=HITOFF&p=1&r= 1&l=50&f=G&d=PALL&s1=6137869.PN.&OS=PN/6137869&RS= PN/6137869

So basically any VOIP system utilizing a database to authenticate callers and bill them for usage is infringement. Amazing.

http://patft.uspto.gov/netacgi/nph-Parser?u=%2Fnet ahtml%2Fsrchnum.htm&Sect1=PTO1&Sect2=HITOFF&p=1&r= 1&l=50&f=G&d=PALL&s1=6104711.PN.&OS=PN/6104711&RS= PN/6104711

VOIP DNS.

http://patft.uspto.gov/netacgi/nph-Parser?u=%2Fnet ahtml%2Fsrchnum.htm&Sect1=PTO1&Sect2=HITOFF&p=1&r= 1&l=50&f=G&d=PALL&s1=6282574.PN.&OS=PN/6282574&RS= PN/6282574

Same.

http://patft.uspto.gov/netacgi/nph-Parser?u=%2Fnet ahtml%2Fsrchnum.htm&Sect1=PTO1&Sect2=HITOFF&p=1&r= 1&l=50&f=G&d=PALL&s1=6298062.PN.&OS=PN/6298062&RS= PN/6298062

Voice mail / call waiting / call forwarding I assume. Now this is proprietary because it's been ported to VOIP systems?

http://patft.uspto.gov/netacgi/nph-Parser?u=%2Fnet ahtml%2Fsrchnum.htm&Sect1=PTO1&Sect2=HITOFF&p=1&r= 1&l=50&f=G&d=PALL&s1=6359880.PN.&OS=PN/6359880&RS= PN/6359880

This looks more applicable to wireless networks; I wonder how it applied in this case.

Re:Hmmm...

[NormalVisual]

I'm paying a comparable amount through Vitelity 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.

Prior Art: Free World Dialup, MSN Messenger?

[Cocoshimmy]

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. 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?

[Cocoshimmy]

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. 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 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:Maybe a little dose of reality

[marvinglenn]

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 around.