VoIP Market Not Hit by Vonage Patent Woe
The legal trouble threatening Vonage Holdings Corp. doesn't yet appear to
be rippling across the Internet phone industry, a stark contrast to last year's
BlackBerry patent dispute that spooked existing and would-be users of the popular
So far, rivals haven't been aggressively targeting Vonage customers who may
be unsettled by a jury's finding last month that the company's service infringes
on patents held by Verizon Communications Inc. And other Internet telephone
providers don't seem to be worried that Verizon might be emboldened to turn
its intellectual property guns on them.
The worst case scenario, seemingly unlikely for now, could mean a disruption
in phone service if Vonage loses its court appeal and either fails to reach
a settlement with Verizon or deploy an effective substitute technology.
"There hasn't been a flood of Vonage subscribers coming to Packet8,"
said Huw Rees, vice president for marketing at 8x8 Inc. "People must be
hearing little snippets of these issues going on between Vonage and Verizon,
but most people not involved in the industry have not heard much about it."
The anecdotal reports have been similar at both SunRocket Inc., another standalone
Internet phone company, and Cox Communications, a cable TV company that provides
phone service using both Internet-based and traditional technologies.
"I would suggest that average consumers are unaware of the (Vonage) ruling,
and that many may not understand the role of VoIP architectures in the delivery
of their phone services," said Cox spokesman David Grabert, using the common
acronym for the "Voice over Internet Protocol" technology employed
in transmitting calls over broadband connections.
This backdrop contrasts sharply with the quandary that faced Research In Motion
Ltd. a year ago as a small company sought a court order to shut down the BlackBerry
e-mail service due to patent infringement.
RIM struggled mightily to reassure BlackBerry users that they wouldn't be cut
off from their beloved e-mail lifelines, yet refused to cave in to the highly
public threats and settlement demands of its accuser, NTP Inc.
Amid the standoff, RIM acknowledged that customers had put off placing new
orders for the BlackBerry due to the threat of a court-ordered shutdown of the
BlackBerry system. Trying to capitalize on those jitters, mobile e-mail rivals
such as Good Technology, since acquired by Motorola Inc., struck deals with
NTP so they could advertise that their services were not at risk of patent litigation
Verizon, though it has played hardball in court, hasn't taken to arguing its
case in the media with the same vigor as NTP, cutting Vonage a break of sorts
with its customers. Verizon declined to comment on its legal and public relations
Vonage has placed updates on its Web site "reassuring customers that the
injunction doesn't impact them or their service," said spokeswoman Brooke
Schulz, but "we haven't gotten many calls from customers on the litigation."
That's one of the few glimmers of good news for Vonage, which has seen its
share price tumble more than 80 percent since its initial public offering of
stock almost a year ago.
The past month's developments -- from the guilty verdict in the federal trial
in Virginia to a pending
injunction that could prevent Vonage from signing up new customers while
using the disputed patents -- have dragged the stock from more than $5 a share
to just $3.
The next step in the case, on Thursday, will be a hearing to determine how
much bond Vonage will need to put up for potential compensation to Verizon while
the case is appealed.
Then the appeals court will decide on Vonage's request for a stay of the trial
judge's injunction barring new customer activations during the appeal. If it
isn't granted, Vonage would have to deploy a workaround technology or stop signing
up new customers.