AT&T Joins Crowd Filing Patent Suits Against Vonage
An AT&T lawsuit against Vonage may be more a strategic move to hurt the top independent VoIP carrier than a “me too” case following Verizon’s and Sprint’s legal success, observers said Monday. AT&T seeks damages, an injunction and attorney’s fees on allegations that Vonage infringed a VoIP patent, in a complaint filed last week in the U.S. District Court for Western Wisconsin. A litigation-weary Vonage wants to settle but should have the money to survive another defeat if that happens, an analyst said.
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The lawsuit follows Vonage losses in patent cases against Verizon and Sprint Nextel (CD Sept 26 p2). A day later, the U.S. Appeals Court for the Federal Circuit upheld Vonage infringement of two Verizon patents (CD Sept 27 p5). Vonage said Oct. 10 it would pay $80 million to settle the case and license the Sprint patents (CD Oct 1 p15). An AT&T spokesman said those developments hadn’t influenced the company’s filing as far as he knows.
The suit may mainly be a strategic move to stunt Vonage’s growth, said Stifel Nicolaus’ Rebecca Arbogast. It’s “no accident” that the leading independent VoIP provider is a magnet for lawsuits by the major telcos, she said. The decision of when to litigate is “always a strategic one,” she added.
Unlike the Verizon and Sprint lawsuits, AT&T alleges infringement of only one patent, relating to what Vonage described as a “wide area packet telephony system.” It’s unclear whether the patent covers technology as vital to Vonage as that sued over by Sprint and Verizon, Arbogast said. She said she couldn’t speculate on how an injunction would affect Vonage until it discloses more about the technology involved. A Vonage spokesman declined to do so.
AT&T gave Vonage more than two years to license its patent, the complaint alleged. In April 2005, AT&T told Vonage’s CEO about the patent, it said. Since the initial notice, AT&T “explicitly communicated” to Vonage lawyers in “numerous” meetings, letters and e-mails that Vonage products and services violated its patent, it said. Rather than bring suit immediately, “AT&T endeavored to enter into a mutually amicable licensing arrangement with Vonage,” AT&T said. “To date, no such license has been entered into by Vonage, forcing AT&T to bring this action.”
Vonage acknowledged discussions with AT&T in a filing Friday with the Securities and Exchange Commission. The companies have been in talks to resolve the matter “for some time,” Vonage said. “Although [Vonage] intends to continue to pursue an amicable resolution of this matter, the Company cannot assure that this matter will not ultimately be litigated.” Vonage favors a settlement, said Chief Legal Officer Sharon O'Leary.
Even if Vonage doesn’t settle and loses the case, the action probably won’t spell the end for Vonage, said Arbogast. Vonage has enough capital from a successful initial public offering to cover possible damage awards in this and the Verizon case, and workarounds for the two injunctions that Verizon has won, she said. Still, the VoIP provider’s officials must be frustrated, she said. “It looked like the skies were clearing for Vonage” after resolutions in the Sprint and Verizon cases, she said. “It’s got to feel like that movie Groundhog Day.”