Red Hat announced on Wednesday that it has reached a settlement with Firestar Software and DataTern over a patent infringement lawsuit.
The lawsuit, filed two years ago in a U.S. District Court in Texas, centered on Firestar's patent for linking object-oriented software with relational databases.
Firestar, in its lawsuit, had alleged that JBoss, which Red Hat had acquired, violated its patent with the JBoss Hibernate 3.0 object-relational mapping tool for Java. Hibernate 3.0 had an open license.
Under the settlement, whose financial terms were not disclosed, all software distributed under Red Hat's brands and predecessor versions are covered, as well as Red Hat customers that use the software. The software protects derivative works, or combination products, that use covered products from the patent claim.
"Typically, when a company settles a patent lawsuit, it focuses on getting safety for itself," Rob Tiller, Red Hat's assistant general counsel of intellectual property, said in a statement. "But that was not enough for us; we wanted broad provisions that covered our customers."
DataTern became involved in the lawsuit after Firestar assigned the patent to DataTern.
Hewlett-Packard announced Sunday that it has settled its patent-infringement lawsuits against rival PC maker Acer.
The confidential settlement agreement resolves three federal court lawsuits, as well as two U.S. International Trade Commission investigations between the parties.
HP sued Taiwan-based Acer in October 2007, alleging seven patent violations. The suits covered patents regarding technologies such as read/write optical drives, power management in notebooks, digital bus arrangement, thermal management and video control.
The suits sought to stop Taiwan-based Acer from exporting its PCs to the U.S. and selling them there. As a result of the settlement agreement, each action will be dismissed as to the parties.
Alcatel-Lucent scored a victory Tuesday when the U.S. International Trade Commission rebuffed a patent infringement claim filed by Microsoft.
The commission reversed an earlier ruling by an administrative law judge, who found Alcatel-Lucent had violated one of Microsoft's patents.
The commission ruled that Alcatel-Lucent did not infringe on patent No. 6,421,439 patent, which deals with technology to identify and affiliate a user in a telephone network, according to the commission's decision.
In its ruling, the commission noted Alcatel-Lucent did not infringe on three of Microsoft's claims because of the way in which the wording for the claims had been modified.
"We are pleased with the decision and always believed we had strong case," an Alcatel-Lucent representative said.
Microsoft was not immediately available for comment.
Last year, Microsoft filed a complaint with the ITC, alleging Alcatel-Lucent had violated four of its patents. The other three included patents 6,430,289, 6,263,064 and 6,728,357, which also relate to communications technology. The administrative law judged had ruled in Alcatel-Lucent's favor regarding those three patents.
A federal appeals court issued a split ruling on Alcatel-Lucent's patent infringement lawsuit against Microsoft and Dell.
The U.S. Court of Appeals on Thursday issued a ruling Thursday that kicks one of Alcatel-Lucent's claims back down to the lower courts for further review. This particular allegation centers on a communications protocol (Ackerman, or 131) patent designed to allow a host computer to communicate with a "terminal device."
The appeals court, in remanding the case back to the lower courts, said the lower court erred in its construction of the term "terminal device."
The appeals court, however, sided with the lower court's ruling on Alcatel-Lucent's digital speech compression (Atal, or 954) patent. The technology is designed to produce natural sounding speech at lower bit rates.
According to the ruling, the appeals court found the lower court was correct in its construction of the phrase "each successive iteration including the steps of."
"We are very pleased with the court's decision on the Ackerman patent and respect its decision on the Atal patent. And we appreciate the careful attention the court paid to our appeal," said Mary Lou Ambrus, an Alcatel-Lucent spokeswoman.
Microsoft, meanwhile, also considers the court ruling a victory.
"We are gratified that the Federal Circuit affirmed the lower court's ruling that speech coding technology in Microsoft's products did not infringe the '954 patent," said David Bowermaster, a Microsoft spokesman. "We look forward to demonstrating at the district court level that Microsoft did not infringe the '131 patent and that the patent is invalid."
The software giant noted it expects to be only a minor player in that dispute.
The appeals court decision has no bearing on Alcatel-Lucent's appeal in another Microsoft lawsuit, in which a a lower court nixed a $1.5 billion jury award to the telecommunications giant in an MP3 case.
Alcatel-Lucent is still awaiting for its appeal to be scheduled with the court.
Sprint Nextel and Verizon Communications both see an opportunity to make a buck on their IP telephony patents after successfully suing Vonage Holdings last year.
On Thursday, Sprint Nextel said in a U.S. District Court in Wichita, Kan., that it was suing four small phone companies. Sprint alleges that Nuvox Communication, BroadVOX Holdings, Big River Telephone, and Paetec Communications are infringing on six of its patents.
Those patents, part of a larger portfolio of patents that cover voice over IP technology owned by Sprint, are the same ones used to successfully sue Vonage. The two companies eventually settled the dispute last year. And Vonage agreed to pay Sprint a total of $80 million, which includes $35 million for past use of the license, $40 million for a fully paid future license, and $5 million in prepayment for services.
Verizon Communications, which won a $120 million settlement from Vonage last year, is also asserting its patent claims. Earlier this month the company filed a suit in the Eastern District Court of Virginia against cable operator Cox Communications for infringing on eight patents that had to do with voice over IP technology. Two of the patents in the Cox case are the same ones Verizon successfully sued Vonage for infringing.
Since Sprint and Verizon have already successfully asserted these patents, it certainly strengthens their new cases. And it's very likely the companies will either win in court or be able to pressure these companies and any other VoIP providers into licensing deals.
This is very good news for Sprint, which would benefit greatly from turning its existing patent portfolio into a cash cow. The beleaguered cell phone carrier has been bleeding customers and is in desperate need of new revenue growth to boost earnings.
Updated at 7:25 a.m. PDT Friday.*
Vonage said Thursday it had resolved an ongoing patent dispute with Verizon Communications at a price tag of up to $120 million, ending what has been a mostly gloomy saga for the struggling Internet phone company.
The announcement comes about a month after New Jersey-based Vonage, which has yet to turn a profit, lost the bulk of an appeal regarding three voice over Internet protocol patents held by the nation's second largest telephone company.
The appeals court upheld a jury finding that Vonage had infringed on two patents that are arguably central to its service. It ordered a new trial on a patent infringement finding, dealing with a feature considered less significant to Vonage's service, but the settlement covers that patent, too, so that court action appears unlikely to proceed. Because the jury deciding the case did not distinguish which damages applied to which patents, the court also threw out a $58 million judgment against Vonage.
The precise amount of Vonage's final payout to Verizon depends on whether the federal appeals court grants a rehearing Vonage has requested on the two central patents, Vonage said in a statement.
If Vonage wins a rehearing or manages to secure relief from an injunction affecting one or both of the two core patents, it has agreed to pay Verizon $80 million. If Vonage is not granted a rehearing or if the injunction, which is currently on hold, is reinstated, Vonage said it will pay $120 million, of which $2.5 million will be "payable to certain charities." Vonage said it has already deposited $88 million into an escrow acount.
"We're pleased to put this dispute behind us and believe this settlement is in the best interests of Vonage and its customers," Sharon O'Leary, the company's chief legal officer, said in a statement. "This settlement removes the uncertainty of legal reviews and long-term court action and allows us to continue focusing on our core business and customers."
Verizon representatives declined to comment on the settlement.
Vonage has claimed all along that it has a technical work-around that will allow its service to continue working without disruption to its customers, even if a court ultimately decides to enforce an injunction prohibiting it from using Verizon's patents.
The settlement decision struck Stifel Nicolaus analyst Rebecca Arbogast as a bit surprising--at least from the perspective of Verizon, which she described as "in the catbird seat."
"Unless Vonage had an airtight work-around, which was unlikely, Verizon was in a position to enforce an injunction against a core aspect of Vonage's service, which could have put them over the brink," she told CNET News.com after the settlement announcement, which arrived just after the 4 p.m. EST close of the stock market. "I would expect that Verizon ultimately decided they'd rather have Vonage alive than dead. And some settlement money to boot."
In addition to the Verizon deal, Vonage has now settled patent disputes in recent weeks with Sprint Nextel for $80 million and Klausner Technologies, a privately held company that specializes in voice-messaging technology, for an undisclosed amount.
But Vonage's legal woes aren't over yet. The company revealed in an federal regulatory filing last week that it's facing a new patent infringement suit from AT&T in Wisconsin federal court.
*This blog was updated to note Verizon's decision Thursday not to comment further on the settlement.
Vonage has asked a federal appeals court to revisit its recent decision to uphold most of a patent infringement ruling in a case it lost to Verizon Communications.
The Internet phone company characterized the request for a rehearing as the "next logical step" in the litigation process and in "moving our business forward."
The struggling firm also continues to "explore all legal options available to put the Verizon litigation to rest," Chief Legal Officer Sharon O'Leary said in a statement Wednesday.
Could that mean another out-of-court settlement is on the horizon? Earlier this week, Vonage settled a patent dispute with Sprint Nextel to the tune of $80 million. That development arrived just weeks after a federal jury ordered Vonage to pay $69.5 million for infringing six voice-over Internet protocol patents.
In late September, the U.S. Court of Appeals for the Federal Circuit upheld a jury's finding earlier this year that Vonage had infringed on two Verizon patents, which are seemingly critical to the way the Net phone company's service works. (Vonage has maintained it has a workaround that doesn't infringe, but some analysts say Verizon may challenge those supposed fixes as well.)
The appeals court opted to send the infringement decision on the remaining patent at issue, which is considered less significant to Vonage's offerings, back to a lower court for a new trial. The court also threw out a $58 million judgment against Vonage because the jury didn't specify how the damages would be divvied up among the three patents at issue.
Update at 2:33 p.m. PDT:
Internet telephony provider Vonage said Monday that is has settled its patent dispute with Sprint Nextel.
The two companies have entered into a licensing arrangement that allows Vonage to use patents for voice over Internet Protocol, or VoIP, technology that are held by Sprint.
Vonage has agreed to pay Sprint a total of $80 million, according to the company. This includes $35 million for past use of the license, $40 million for a fully paid future license and $5 million in prepayment for services.
In September, a Kansas jury found that Vonage had infringed six Sprint patents. And it ordered Vonage to pay $69.5 million in damages, plus 5 percent for future damages.
Literally the next day, Vonage lost its appeal in its patent legal battle with Verizon Communications. In March, a jury in Virginia found that Vonage had infringed on three patents. And the court ordered Vonage to pay $58 million in damages.
With this latest settlement, Vonage has at least alleviated some of the legal pressure on the company.
"We believe this deal is good news for Vonage, our customers and our shareholders," Sharon O'Leary, Vonage's general counsel, said in a statement. "It allows us to put this litigation behind us and continue to focus on our core business by removing the uncertainty of legal reviews and long-term court action."
After months of battle, Vonage has lost the bulk of its appeal in the Verizon Communications patent infringement case.
In March, a jury in Virginia found that Vonage had infringed on three patents held by Verizon. And it awarded Verizon $58 million in damages along with future damages of 5.5 percent on the revenue that Vonage was making during the appeal process.
The judge in the case imposed an injunction on Vonage that would force the company to stop delivering a service using technology that infringes on Verizon's patents. But because Vonage has been appealing the case, the injunction has not yet gone into effect.
On Wednesday, Vonage's appeal essentially came to an end. And as the legal dust settles, the small voice over IP company now faces the possibility of paying hefty monetary damages and a total shutdown of its IP telephony service.
But as is often the case in complicated legal disputes, the actual outcome of the case is still far from certain. In its final judgment, the U.S. Court of Appeals threw out one of the three patent verdicts and upheld the other two. And because the total damage award was assessed based on Vonage violating all three patents, the appeals court asked the lower court to reconsider the entire $58 million damage package awarded in March.
On the one hand, this sounds like a partial victory for Vonage. And the company has said as much.
"We thank the appellate court for its thoughtful consideration of the merits of our case," Vonage's chief legal officer, Sharon O'Leary, said in a statement. "We are pleased with the decision to vacate the 880 patent and the damages. However, Vonage remains confident that it has not infringed on the 880 patent--a position we will continue to vigorously assert and look forward to presenting at trial."
But the reality of the situation is altogether different. For one, the two patents the court upheld happen to be the most fundamental to Vonage's service. Essentially, U.S. Patent No. 6,282,574 and U.S. Patent No. 6,104,711 define how phone calls are routed over the Internet, which essentially is the basis of Vonage's IP telephony service today.
By contrast, U.S. Patent 6,359,880, which is the patent the appeals court said would have to be retried by the lower court, has to do with how public wireless and cordless Internet gateways communicate with the Internet. Because this technology is not a big part of Vonage's commercial service today, sending the case back to the lower court will likely have little impact on Vonage's actual business.
And because the '880 is considered less significant, when the lower court reassesses damages, as it's been asked to do by the appeals court, it could just re-enter the same amount without holding an entirely new trial.
The reason is simple. Both Vonage's and Verizon's experts who testified during the original trial, stated that the '880 patent should have little impact on determining damages. This means that the damages that were assessed were based mostly on the cumulative contribution from the two other patents, '711 and '574. And the judge could look at this testimony and re-enter the $58 million for damages.
But in addition to the hefty damages the company will still likely have to pay, Vonage is now facing the possibility of having its service shut down.
During the appeal, the injunction issued by the judge in the case was not in effect. But once the appeals court's decision is final, which should happen within two weeks to a month, the injunction barring Vonage from using any technology that infringes on Verizon's patents goes into effect.
Vonage is adamant that its service will continue.
"It's business as usual," O'Leary said in a statement. "We have had our workarounds for the '711 and '574 patents in place for some time and will remain focused on providing a great customer experience."
But these claims will have to be verified. Right now it's unclear how this will work. Either the court will step in to determine if the new fixes violate the patents as they were examined during the trial, or Verizon will have to challenge the new workarounds.
One thing is certain, Vonage's troubles are far from over.
"I think there is definitely a threat that its service could be impacted," said Rebecca Arbogast, an analyst with Stifel Nicolaus. "Vonage says it has a workaround, but who's to really know? My hunch is that Verizon will likely aggressively challenge these fixes as well."
This latest legal blow comes just one day after a jury in Kansas found that Vonage infringes on six patents held by Sprint Nextel. The jury awarded damages of $69.5 million in that case. All in all, the news looks bleak for Vonage, said Arbogast.
"These are different patents in a different court," she said. "But the damages in the Sprint case are significant, and it's just piling on one more shovel full of penalties on the company at a time when it already has a significant amount of money tied up in escrow over the Verizon case. Plus, there's the threat of an injunction, and it makes investors wary."
Indeed, Vonage's stock dipped another 26 percent to close at 96 cents per share.
Internet telephony player Vonage was dealt another serious legal blow Tuesday when a federal jury found the company had infringed on six patents held by Sprint Nextel.
The jury ordered Vonage to pay Sprint $69.5 million in damages.
Sprint sued Vonage in 2005, claiming the company was infringing on seven Sprint patents that dealt with connecting Internet phone calls. Vonage denied the claims and argued that Sprint's patents shouldn't have been approved in the first place.
Vonage said in a statement that it will appeal the federal court's verdict. Vonage also said it will develop technological workarounds that don't infringe on Sprint's patents.
"We are disappointed that the jury did not recognize that our technology differs from that of Sprint's patents, Sharon O'Leary, chief legal officer for Vonage, said in a statement.
This is the latest in a series of legal setbacks the voice over Internet Protocol provider has faced this year. In March, a jury in Virginia found Vonage had infringed on three patents held by Verizon Communications. And the court ordered Vonage to pay $58 million in damages, plus 5.5 percent in royalties on future revenue earned while it was infringing on the patents. Vonage is currently appealing the decision.
Vonage's stock price plunged more than 33 percent Tuesday after the verdict was released, and it closed at $1.30 a share. O'Leary attempted to temper customers' and investors' concerns that this latest legal decision would harm the company.
"Our top priority is to provide high-quality, reliable digital phone service to our customers," she said in the statement. "Vonage has already demonstrated that it can keep its focus on customers and on its core business while managing ongoing litigation."
But in truth, Vonage has had a very hard time keeping its business going while it also fights its legal battles. In August, the company reported that subscriber growth had dropped significantly. In the second quarter of 2007, Vonage added only 57,000 new customers. This is down dramatically from the 166,000 new customers it added in the first quarter.
But Vonage didn't just have trouble acquiring new customers. It also had trouble keeping them. During the second quarter its churn rate, or the rate at which customers cancel service, rose to 2.5 percent from 2.4 percent in the previous quarter.
The only thing the company has going for it right now is that it has a lot of cash on hand. At the end of the second quarter, the company said it had $344 million in cash and about $191 million working capital, which is the cash it has on hand to run its day-to-day business. But even with this cash reserve, Vonage has a long and difficult battle ahead of it. Because without customers, Vonage can't stay afloat forever.
