Voice over Internet Protocol telephony (a.k.a. Voice over IP or simply VoIP) has been a hot topic in the telecom arena for many years now. But its progress into the telecom market has been far slower than was originally expected … in the US, that is. VoIP has grown by leaps and bounds in Western Europe. Market research from Telegeography indicates that VoIP subscribers in Europe will comprise 40% of the market by 2011. In the US, the forecast is only 20% of the market in the same year. And anecdotal evidence would indicate that, as with many telephony advances, the technology on the consumer market is more mature in Europe than in the United States. What has happened to this promising new technology in the United States?
Certainly, independent providers such as Skype or Vonage, who rely on someone else's network to deliver their services, have no ability to control the traffic or bandwidth allocation in the network. This gives them limited control over the quality of the service they deliver. Only more recently have internet service providers, such as Comcast, begun to take a place in the VoIP race, where their overall control of the traffic on their networks allows them to prioritize voice or video content to deliver higher quality service. And VoIP needs to deliver high-quality service to take over any considerable market share.
But beyond the business model or technical issues, the IP issues (and we are talking about Intellectual Property now, not Internet Protocol) have been a major problem for VoIP developers and providers in the United States. A veritable storm of lawsuits has hit the courts, siphoning away profits and corporate momentum from companies already in the market, and blighting the prospects of new entrants on the verge.
Vonage and Verizon seem to have become hubs of activity; Vonage as a target, Verizon as an aggressor. Vonage was the leading VoIP provider in the US at the beginning of the mess, which apparently made it an ideal target. Sprint Nextel was first to file suit against Vonage for patent infringement in October of 2005, but was soon followed by Verizon in 2006. Next in line was a suit from AT&T in 2007, shortly followed by a suit from Nortel... (Vonage settled with Sprint Nextel Corp. for $80 million, and is fighting $58 million in damages awarded to Verizon Communications Inc.).
Verizon appears to have been galvanized by their partial victory with Vonage. They also brought suit against Cox in January of 2008 and against Charter only a month later. However, the decision in the Cox case, at least, went against Verizon. Their suit against Charter is still pending, and Charter has brought suit against Verizon for infringement of four FiOS patents.
And this is just a handful of the US patent VoIP litigation over the past decade. Certainly, anyone who intends to do business in this arena should do some careful examination of the pre-existing art. But it is not always a simple matter to predict what degree of similarity is allowable, and what constitutes infringement - or rather, what might be judged to be infringement in patent court, especially with such a large body of art; over 22,000 patent families registered in the US office since 1989 reference voice over IP.
European companies seem largely to have managed to avoid the storm of suits that have plagued the US. Is it due to the differences of European patent law vs. US patent law? Is it due to the European Patent Commission? Or, is it due to superior strategy on the part of the European companies?
I would say that it is likely to be due, somewhat, to all three of these. But only the last -- the business and patenting strategies -- will do any good in the short term for the imperiled US VoIP providers.
VoiceAge Corporation, a French VoIP developer, recently announced a patent pool for the development of the AMR (Adaptive Multi-Rate) narrowband codec (an ETSI and 3GPP ratified standard), with Ericsson and Nokia. As with VoIP, this is a high-technology product dependent on hardware, software, and a network environment. If patent pooling works for their scenario, it works for VoIP. Patent pooling, and other collaborative patenting practices out of the open-innovation toolbox, holds a good deal of promise as a defensive strategy. If these approaches are not used in the early stages of development, there are still licensing agreements that can be crafted to maintain forward momentum.
VoIP litigation issues have demonstrated the need for patent reform in the United States.
In the long term, perhaps a better solution is one or another flavor of patent reform. Recently, more than one set of people in the patent arena have suggested that software patenting should have a shorter lifespan than other types of patenting. Even Jeff Bezos, CEO of a company that is dependent on business methods and software (Amazon), and presently involved in defending a software patent, has conceded that business method and software patents should be handled differently, and enjoy a shorter lifespan. (See "Bezos and O'Reilly Spearhead Call for Patent Reform").
Others have gone farther. Gary Litman, the Vice President of the US Chamber of Commerce's Europe and Eurasia policy, has suggested a shorter lifespan for every kind of patent other than pharmaceutical patents, where the long development cycle more or less demands a longer term for the patent. (See "Patent Flexibility").
I would suggest a compromise, with shorter lifespans for business methods and software, but also for embedded software electronics. Developers in these fields now have the advantage of working with libraries of software modules, and electronically stored and shared information. Changes of this sort, however, would need to be paired with lower filing fees, and an abbreviated or completely different examination process.
The US Chamber of Commerce has recently released its "Recommendations for Consideration by the Incoming Administration Regarding the U.S. Patent and Trademark Office" (PDF). In this document, it is suggested that the USPTO's peer-to-patent program be expanded, allowing open peer review of new applications. However, other suggestions in the same document move in the opposite direction, suggesting a more exacting system of examiner appointment and training. A move in either direction could provide tighter patenting control, and more dependable patent validity, which would in turn lower the numbers of overlapping patents and reduce infringement suits. Whatever changes can accomplish that goal would almost certainly yield a domestic payoff of better technology and better business.
About the Analyst
Nerac Analyst Margaret Fiore, a member of the Nerac intellectual property group, is particularly experienced in patent investigations, specializing in reporting on topics related to optics, lasers, imaging, aerospace, military projects and contracting, and telecommunications. She brings Nerac clients a strong interest in many scientific disciplines, enabling her to be highly effective in researching unusual topics involving multiple fields of study. Ms. Fiore has 18 years of industry experience in electronic aviation controls with United Technologies Corp., and in fiber-optic transmissions of analog and digital video with the Broadband division of ADC Telecommunications. She was a technical writer and engineering liaison for telecommunications and aerospace companies in Connecticut. Ms. Fiore, who holds a bachelor's degree in English and journalism from the University of Massachusetts, is also a certified electronics technician. She is expert in commercial and military technical documentation for aerospace, and Bellcore technical documentation for the telecommunications industry. For more information please visit us on the web at www.nerac.com.
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