Vonage vs. Verizon: Round 2

The next round in the ongoing patent infringement saga between Verizon and Vonage will begin on Monday when the companies present their oral arguments to the federal appeals court in Washington, D.C.

Vonage is arguing a few things. First, it believes that it got a bum deal even before the original trial started. Vonage argues that during the markman hearing, or the hearing in which terms of the patents were defined, several of the terms were defined too broadly. This hurt Vonage in the trial because it was this broad definition that the jury used to determine whether or not Vonage had infringed on the patents.

The other major argument that Vonage will make in its appeal centers around a recent Supreme Court decision that could make it easier to argue that some patents aren't even valid because the technology described is so obvious. Vonage argues that the technology it supposedly infringes falls under this category and that the jury made its decision before this case (KSR International vs. Teleflex) was decided by the Supreme Court.

Verizon argues that Vonage's arguments surrounding the markman hearing are invalid because of procedural issues. And it doesn't believe that Vonage should be able to argue on the obviousness of the patents using the KSR International decision, because it never even brought up this issue in the regular trial.

Legal experts have said that Vonage's best chance of winning on appeal would be based on redefining the markman definitions, but even that could be a long shot.

Whether Vonage wins or not, the company is still in bad shape. It's losing subscribers, which is never good for any service provider. And it's essentially a one-trick pony in a market that is quickly becoming commoditized. Very soon voice will be offered as another free application bundled with a bunch of other services. Phone companies and cable operators are already deeply discounting service as part of their bundled packages.

And simply touting new features might not be enough to win over new customers, especially as Verizon enters the voice over IP market with a more aggressive offering. Verizon CTO Mark Wegleitner said this week Verizon will offer VoIP as part of its Fios service.

What's more, there are a whole slew of new VoIP start-ups emerging that have taken a more telecom-friendly approach to the market. For example, JaJah allows people to make cheap IP phone calls using their existing phones. It doesn't require a separate router like Vonage nor does it require software like Skype.

Another major issue for Vonage is the fact that the company has spent a lot of time, money and energy fighting with the Federal Communications Commission and other regulators over E911 and CALEA requirements. For the most part, it's lost those battles. And now it's even expected to pay into the Universal Service Fund, which essentially jacks up prices for consumers.

I don't think that Vonage will disappear. The company has too many subscribers for that. I happen to be one of them. But I do think the company has a tough road ahead of it, regardless of what happens in court next week.