Vonage lost a patent infringement case brought against it by
mobile phone company Verizon earlier this year. Its phone service
was found to be violating three Verizon patents, and it was ordered
to pay $58 million in damages, pay a 5.5% royalty to Verizon and
injuncted not to sign up any new customers.
In a separate case, the Supreme Court has just produced a
new ruling on how courts should define what is 'obvious' in a
patent. Vonage argued that it would have won its case under the new
guidance and asked for a retrial.
The US Court of Appeals for the Federal Circuit has denied
Vonage its retrial, but it did say that the company could cite the
new Supreme Court ruling in its appeal against that verdict.
The Supreme Court ruling says that the test usually used to
determine whether an invention was too obvious to patent – the
'teaching, suggestion or motivation' test – was too tough.
The Court said that that test was only ever a guide, not a hard
and fast rule, and that it set the bar too high on obviousness. Its
ruling will have the effect of making it easier to challenge
patents on the basis that they represent an 'obvious' improvement
to existing technology.
"We are very encouraged by the Supreme Court's decision and the
giant step it represents towards achieving much-needed patent
reform in this country," said Jeffrey Citron, founder and interim
chief executive of Vonage earlier this week. "The Supreme Court's
decision should have positive implications for Vonage and our
pending patent litigation with Verizon."
A court found in March that Vonage had violated three Verizon
patents relating to the connection between its network and the main
telephone network. It did not find that the violation was wilful,
which would have involved a tripling of the damages.
The court ordered it to stop signing up new customers, an
injunction which Vonage said could spell the end of the company. It
argued that the rate of drop out and new adoption of VOIP services
by customers means that a bar on accepting new subscriptions could
irreparably damage the company.
It won first a termporary and then a permanent reprieve on that
injunction, which is to be held off until the end of its appeal
against the original verdict.
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