Lost patent battle leaves VoIP provider in a hole

Loss-making voice over IP provider Vonage is facing a crisis after losing an expensive patent battle with Verizon Wireless in the US.

Loss-making voice over IP provider Vonage is facing a crisis after losing an expensive patent battle with Verizon Wireless in the US.

The jury in the trial ordered Vonage, which entered the UK market around two years ago, to pay Verizon $58m (£30.5m) in damages and a 5.5% royalty fee on future revenues.

The damages are equivalent to Vonage’s current quarterly losses. It is unclear at this stage whether Vonage will be able to find an adequate technical workaround to end any future patent infringements.

The case is similar to the widely publicised patent battle between Blackberry maker RIM and NTP. In that case, Blackberry users faced the prospect of not being able to use their devices in the US until RIM agreed to pay big damages and license the NTP technology.

Vonage competes against the likes of Skype in both the consumer and enterprise VoIP markets. E-Bay-owned Skype recently announced that its client VoIP software had been downloaded 500 million times worldwide since it had launched.   
 
Jan Dawson, an analyst at Ovum, said, “As this case gets more coverage, potential customers will be worried about signing up for a new service with Vonage, and existing customers may churn in larger numbers than usual.

“Both of these effects would be disastrous for Vonage, which desperately needs to acquire customers more efficiently in order to break even.”

Vonage had argued that the patents it infringed were written so broadly as to catch many industry-standard technologies in their net, making it almost impossible to work around them.

Dawson said it remained to be seen whether Verizon would go after other companies using similar technology once the case was over. “This case could have a ripple effect across the whole VoIP market," Dawson said.

It is not though that the patent ruling affects the network that Vonage uses in the UK, but UK users could see their service terminated if the US parent goes bust.

Comment on this article: computer.weekly@rbi.co.uk

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