IP Democracy: Vonage Death Vigil: Two Blows in Two Days

Vonage is in so much trouble that I'm almost rooting for the scrappy VoIP pioneer to turn things around in a big way. The latest set of woes afflicting Vonage are, of course, legal in nature.

Yesterday Vonage lost yet another patent lawsuit, but the victor wasn't Vonage's main antagonist, Verizon, but Sprint-Nextel. A jury found that Vonage infringed six of Sprint-Nextel's patents related to VoIP and ordered the Holmdel, NJ-based company to pay $69.5 million in damages plus 5% royalty on future revenue.

Sprint-Nextel, however, will have to get in line behind Verizon, which won a major victory today when The U.S. Court of Appeals in Washington upheld a District Court decision which ruled that Vonage had infringed upon Verizon's VoIP patents. Vonage had been betting it could turn around that disastrous lower court decision in the appeals process, but apparently not. "We are confident in the strength of our appeal," interim CEO and founder of the company Jeffrey Citron said during Vonage's Q2 07 earnings call.

The legal picture isn't completely black for Vonage. The appeals court did remand the decision on one of the patents (related to Wi-Fi phones) back to the district court, which delays the ultimate enforcement of the original $58 million infringement award and 5.5% royalty payment mandate.

This technicality holds little joy for Vonage, which has been accruing for accounting purposes the Verizon patent award expenses ever since the jury verdict and original decision came out last spring.

So, not only are customers fleeing Vonage at an accelerating clip, but now the ailing company has to deal with not one but two major patent infringement case defeats. It's kind of sad to see Vonage soldier on in the face of so much adversity. No wonder TeleGeography analyst Stephan Beckert is willing to go on the record with the following quote: "Poor Vonage, they can't get a break."

Posted by Cynthia Brumfield on September 26, 2007 3:24 PM to IP Democracy