In the short history of Vonage, 2007 is the year when Vonage ended up losing four patent suits, and in each case, having to pay huge sums of money. Vonage has pay AT&T $39 million, Sprint Nextel (S) $80 million, and Verizon Communications (VZ) $120 million to settle patent infringement lawsuits.
However, Vonage’s patent dispute with Nortel Networks has a less-bitter ending for Vonage – the settlement allows for cross-licensing of each companies’ patents, but does not involve any payments by either company. These patents are related to making emergency calls and dialing 411. Vonage was dragged into this legal battle with Nortel when it acquired three patents from Digital Packet Licensing (DPL) in 2006. DPL had filed a patent infringement case against Nortel in 2004 alleging violation of those three patents, so Vonage continued with the lawsuit. Nortel countersued, claiming that Vonage violated 13 of Nortel’s patents, and asked that Vonage be kept from using the technology. The settlement is subject to final documentation.
Om thinks that Vonage’s problem is playing the cheap voice game, but Vonage’s primary risk is not cost management (OK marketing/advertising costs has always been an issue), but that Vonage has no Intellectual Property protection. So far mainly the service providers have filed patent infringement lawsuits, but there are many equipment vendors and with many VoIP patents (much like Nortel) who could go after Vonage. Vonage still has many challenges ahead of it, but this settlement gives it yet another breather.