The latest patent eruption

The jury in the Verizon-Vonage patent litigation just returned a verdict in favor of Verizon, finding that Vonage infringed on VOIP patents. It ordered Vonage to pay $58 million, plus 5.5% of revenue in royalties (about $1/user/line). And the judge still has the option of ordering an injunction against Vonage.

Vonage has lots of problems, and I’ve been skeptical of its prospects as a standalone company for a while. But this could be a huge drain on what is still a financially uncertain business. I’d expect the decision to be appealed, and potentially settled.

Even so, it’s potentially a dark cloud for other VOIP providers. Verizon isn’t just a bunch of investors and lawyers looking to get rich; it’s a major competitor of those VOIP companies. I don’t expect it to hold back in using its patents as a competitive weapon. And one can only wonder what fundamental patents lurk in the depths of the new AT&T, waiting to be dragged out against new competitors….