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Nortel Claims Vonage Violates Internet-Phone Patents

Dec. 14 (Bloomberg) — Nortel Networks Corp., North America's biggest maker of telecommunications equipment, claimed Vonage Holdings Corp. is infringing 12 patents covering technology used in managing telephone data.

Bloomberg

Context & Ripple Effects

Vonage enters this suit already battered: an April court loss its own lawyer called a 'bullet to the head', and an October settlement with Sprint that put the company on a royalty-paying footing barely two years after its 2006 IPO. GigaOM's June profile framed it as a last stand — a subscriber-growth story strangled by litigation costs.

Nortel's claim over 12 patents covering telephone-data management is different in kind from the earlier suits: it comes from North America's largest telecom equipment maker, not a rival VoIP carrier, and follows confirmed reports from May that Nortel leaned on open-source vendor Fonality after a customer chose Asterisk over a Nortel PBX.

First-order effects

  • Vonage must fund a defense against a second deep-pocketed litigant in one year, on top of the Sprint settlement payments already weighing on its post-IPO finances.
  • Nortel gains immediate licensing leverage: with 12 asserted patents spanning call-management technology, it can press Vonage toward the same per-line royalty structure Sprint extracted.

Second-order effects

  • Other independent VoIP providers face the same playbook — if Nortel extracts terms from the most visible target, every carrier riding incumbent networks becomes a candidate licensee.
  • Equipment rivals watch whether Nortel converts its portfolio into a revenue line; the Fonality episode suggests the strategy extends beyond carriers to any deployment that bypasses Nortel hardware.

Third-order effects

  • If legacy vendors systematically assert patent portfolios against VoIP entrants, litigation cost becomes a structural barrier to entry in voice services, favoring incumbents regardless of whose technology wins on merit.
  • Patent assertion as a profit center could outlive the product businesses behind it — portfolios built for making equipment becoming assets licensed against the industry that displaced it.

The trend: Legacy telecom equipment makers are converting dormant patent portfolios into licensing leverage against VoIP challengers, making litigation a recurring tax on internet telephony's growth stage.