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Vonage denied retrial in patent case

Supreme Court ruling provides new basis for appeal

Voice over Internet Protocol (VoIP) phone company Vonage has been refused permission to have its patent case re-heard, but can introduce a new Supreme Court ruling in its appeal.

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 $58m in damages, pay a 5.5 per cent 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 the 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 temporary and then a permanent reprieve on that injunction, which is to be held off until the end of its appeal against the original verdict.

Copyright © 2007, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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