Is Verizon the Big Winner or The BIG Winner in Vonage Suit?

Carl Weinschenk

It's impossible to predict precisely how much Verizon's victory in its patent infringement suit will hurt Vonage from the early coverage, including this NewsFactor piece. One thing is for certain, however: This isn't good news for the VoIP provider.


Late last week, an eight-member jury in U.S. District Court found that Vonage infringed on three patents held by Verizon. The jury awarded the carrier $58 million in damages and future monies if the infringement continues. That's quite a hit to a struggling company -- especially one experiencing trouble on other fronts as well.


The money could be the least of Vonage's worries, however. The coverage suggests that the patents cover areas that are central to the VoIP carriers' operations and that it would be severely constrained if it was forced to cease using the technology.


It would be very interesting to hear a corporate legal expert weigh in on the settlement. In general, companies that lose patent fights strike licensing deals with the victors, or such arrangements are struck before the case comes to trial. Such preemptive negotiations worked out well last year when NTP Group and Research in Motion (RIM) were set to duke it out in court over the inner workings of RIM's Blackberry.


The interesting thing here is that the best move for Verizon would be to take a shot at putting Vonage out of business, and it already has asked for an injunction that would keep it from using the technology. NTP was never going to take down RIM, so its best approach was to make a deal. Verizon has a fiduciary responsibility to do the best by its shareholders. Does this mean that its strategy will be to put Vonage out of business if it can, or are there legal strictures that require there to at least be an attempt to make a deal?


The other question, of course, is whether there are sufficient workarounds that would make Verizon more willing to negotiate. Last year, RIM claimed that it wouldn't miss a beat if NTP pulled its technology. Among the questions that swirled at the time: Did the replacement technology really exist? If it did, was it as effective as NTP's?


In that case, the questions never were answered because the two sides reached an accommodation. This time, however, those concerns may actually come to a head.

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