Flipping through channels, trying to find something to watch, I stumbled across a commercial set to an annoying tune. The commercial switched between the glowing commentaries of several different actual customers: “Vonage was so simple to install” and “No one asks, ‘hey, are you on VoIP?’” Well, they might not be asking, but seeing the dire straits that Vonage is currently in, you probably won’t be able to for much longer…

The trouble all started back in mid June of 2006, when Vonage acknowledged that they were being charged in a lawsuit filed by Verizon for supposedly infringing upon seven patents related to Verizon’s VoIP technology. The patents dealt with various protocol procedures, such as completing connections between users, authentication of callers, account validation, fraud protection, and network usage surveillance. Verizon, scared that they were being cheated out of their money, demanded that Vonage pay them a hefty $200 million, and cease and desist operations immediately.

The next significantly major event occurred on the 8th of Match in 2007, when a jury found Vonage guilty of infringing upon three of the patents held by Verizon – they were acquitted of infringing upon two others. As part of the judgment, Vonage was ordered to pay $58 million dollars, along with a 5.5% royalty rate for every new sale, to Verizon. As could be expected, Vonage felt that the verdict was unfair, and promised to appeal the decision. The patents that Vonage was found guilty of having infringed upon deal with the manner in which VoIP customers were being routed and connected to customers on traditional telephony grids; the implementation of basic call-waiting and voice-mail services; and also, how the protocol handled the use of Wi-Fi handsets in conjunction with the service. The other two patents were also found to be valid, but, according to the jury, Vonage didn’t infringe upon them.

Right after the verdict was handed down, Vonage announced that the existing Vonage customers, some 2.2 million subscribers, would not have to endure a loss of service because the company was working on getting a technological workaround in place. It quickly became apparent that the proposed workaround would probably take a lot longer than Verizon and the courts might be willing to wait. In light of this, Vonage managed to reach an agreement with VOIP, Inc. on April 3rd, 2007, that would allow them to use their infrastructure to continue service without interruption. This arrangement quickly took care of two out of three patent infringements.

Three days later, on April 6, the federal court of appeals handling the case granted Vonage a temporary stay, meaning that the company would be able to sign up new customers while the appeals process takes its course. Seeing as how the time from suit to verdict in round one took roughly nine months, this legal struggle may not end soon.

Although Verizon may have won the battle, the war is far from over. There seems to be a wide contention that the court has interpreted the Verizon patents too broadly. After all, two of patents deal with translating an IP address into a phone number – how basic is that? The third is hardly any less trivial; it deals with getting a call through to a short-range wireless device, such as a cordless home phone. If Verizon ends up winning the war as well, it could definitely set a very dangerous precedent for other big-name Telco’s. In light of the monopolistic nature of Verizon and friends, it wouldn’t seem unreasonable to assume that they might try to go after the rest of the VoIP community as well. Vonage was first, might Skype be next?