Vonage has admitted that it has no technical work-around to avoid infringing Verizon's patents on key VoIP techniques, putting the future of the company, and other VoIP providers in the US, in doubt.
The VoIP industry is a minefield of patents, but those granted to Verizon are so broad it's not clear if any VoIP company could avoid them, so Vonage could simply be the first of many who will be forced to pay up to Verizon or go out of business.
There are two key patents involved: U.S. Patent 6,282,574 explains how a numerical IP address can be mapped to a textual domain such as an e-mail address, and from there to a phone number. This makes it possible for a call to be routed from a VoIP network to a traditional phone system. 6,359,880 covers the business process of making, and receiving, VoIP calls over public wireless networks.
Just to make things more complicated the patents have been interpreted by the judge to be even broader than filed, though a process called a "Markman hearing", but the results of that hearing have been sealed so aren't available for public scrutiny.
What we do know is that last month a jury (yes: US patent issues are adjudicated by jury) found Vonage to be in breach of both patents, and 6,104,711: which covers provision of conference calling, Caller ID and other enhanced services. Vonage were ordered to pay $58 million in damages.
The Judge immediately ordered an injunction to stop Vonage signing up new customers, but given the level of churn in the VoIP industry that would have killed the company, so a temporary stay of the injunction was granted by the appeals court.
Vonage told customers not to worry as they were working on a technical fix to avoid infringing on the patents; a fix which they now admit is beyond them. They do say they are confident that they can win on appeal, but that that process could take two years and will cost a great deal of money: perhaps more than the company can afford, meanwhile they are applying to extend the stay on the injunction indefinitely.
According to Paul Derry, from patent experts Venner Shipley, most of Verizon's claims should only apply to companies with servers located in the US, even if services are being offered to US citizens, so Skype and friends should be in the clear. But Verizon is unlikely to stop at taking Vonage out of the picture. US cable companies have been very successfully in signing up subscribers to their VoIP services, offering simplicity of usage and guaranteed quality of service, so it seems likely they will be next in Verizon's sights.