Toni just posted a note on the Sunrocket and every point she makes is true!
Cable companies are encroaching the VoIP business turf; SunRocket was bleeding and without a major cash infusion, it was not going to survive for long, but the event that precipitated its demise was the patent war between Verizon and Vonage.
So what happened? Because of the Vonage-Verizon patent tussle, where the punishment for loosing the lawsuit was death, investors taste for VoIP companies dried up. In March/April, SunRocket, (the #2 independent VOIP company) was looking for $20-$40M series D funding, but had trouble closing the round; after the patent verdict, the whole sector had became untouchable. Vonage, Packet8, SunRocket , the whole group joined the bottom pool and without new cash and any possibility of getting new cash in near future, SunRocket died.
Without the patent sword hanging on its head, Sunrocket would have survived for another couple of years and then probably would have merged with another VoIP provider. After the Vonage verdict, it became a game of Russian Roulette with a fully loaded gun.
People very often ask me, are patents really worth having? Give me a good example of where patents (and not much else) mattered. I guess now there is a new poster child; Verizon vs. VoIP. The last I heard, the court had ordered Vonage to pay $58 million in damages for infringement, and a 5.5 percent licensing fee for the continued use of the patents. If the appeal fails, Vonage is toast.
Some say that the Verizon patents are junk patents and yet when the order came down from the court, it didn’t seem like a Junk order to me, the damages awarded had a lots of zeros in them!
Verizon patents crippled Vonage, one of its major VOIP challenger and summarily killed the second VoIP challenger without spending an extra dime. All other players in this sector are feeling the pinch. Hope this demonstrates the power of having the right patent.
The company that may survive is Packet8 , another independent VoIP company. It has a slew of patents and they are likely to be able to use this patent portfolio as a defense against Verizon and others.
A patent can work as a sword, a shield and, as in Verizon’s case, as a shot gun!