SunRocket Suit is ‘Noise,’ but Other Cases Could Kill Vonage

SunRocket’s complaint is an “annoyance suit” that “doesn’t concern me from an industry standpoint,” Nuvio CEO Jason Talley said, calling the suit simply “the last gasp of air from SunRocket.” Nuvio considered buying SunRocket assets at the board level, but never got far enough to exchange customer lists, he said. From a business standpoint, it was “atypical” for Vonage to get access to the SunRocket list, he said. Vonage’s defense, that it got a list of recently disconnected VoIP customers from third-party broker Paradysz Matera, is a “valid excuse,” Talley said: The names would be public domain. Though he doesn’t worry about the SunRocket suit’s effect on the VoIP industry, Nuvio “will be watching” Vonage’s patent litigation, he said.

If the Verizon and Sprint actions produce injunctions, they could ruin Vonage, Arbogast said. Trying the cases, though costly and distracting, probably won’t bankrupt Vonage. But if unfavorable decisions come down and Vonage has no suitable workarounds to the contested Verizon and Sprint patents, “an injunction could be the straw that breaks the camel’s back,” she said. Talley disagreed, saying Vonage is a “big company” that “has the capacity to survive.” he said.

Vonage expects a September ruling by the U.S. Court of Appeals for the Federal Circuit on Verizon’s claim, a spokesman said. The case has run unexpectedly long, said Arbogast, who was expecting to hear something before now. The delay has given Vonage time to devise workarounds, she said. A Vonage spokesman said workarounds for two of the patents are “99-point-something” percent deployed. A workaround for the third is ready, but Vonage won’t use it before the court rules, he said. The court could hand down a mixed decision, upholding two of the infringements and sending one back down to the district court, Arbogast said.

The Sprint trial begins Sept. 4 in U.S. district court in Kansas. That outcome is difficult to predict, Arbogast said.

Timetables for the Nortel and SunRocket suits are hazy, too. This month Vonage filed a complaint against Nortel in the Wilmington, Del., District Court (CD Aug 22 p9). Vonage wants a declaratory ruling that stops a Nortel countersuit in the district court for northern Texas alleging that Vonage infringed Nortel patents. Last week, Vonage withdrew its attorneys in the case, a “routine” change that “won’t affect the case,” a spokesman said. In the SunRocket case, Vonage has yet to reply to the Delaware Chancery Court, a Vonage spokesman said. Vonage has said the “suit lacks merit” (CD Aug 24 p3).

Its status as the leading independent VoIP company may make Vonage a “litigation magnet,” Arbogast said, suggesting that suits against the company could be competitive ploys. But Vonage -- competing as it must against major telcos’ and cable companies’ triple plays -- may have “stepped on” rivals’ patents, she said, noting that competitors’ bundles confer a pronounced edge. “In an era of bundled services, independent VoIP companies are at a disadvantage,” she said. To increase its allure, Vonage must be more innovative but assertively creative behavior increases the chances of patent conflict, she said.

Vonage blames competition. “Patent cases are part of doing business in 2007,” a Vonage spokesman said. Verizon, for example, uses patents as a “competitive weapon” against Vonage, he said. He declined to comment on the basis for Sprint’s lawsuit. Arbogast agreed that Vonage patent suits could embody a trend toward using intellectual property litigation in aid of competitive goals. “There has been a huge wave of intellectual property litigation in the whole industry,” she said.