Patent Issues for Telecom and VoIP Clients William B. Wilhelm, Jr. Bingham McCutchen LLP

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA 1 The Verizon - Vonage Decision –Verizon - Vonage Patent Litigation Status and next steps, Lessons, Impact –Scope of the Verizon Patents Coverage, work-arounds and potential invalidity –Other Patent Portfolios –Lessons for clients / advisors Overview

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA 2 The Verizon - Vonage Decision Verizon sued Vonage for infringement of 7 patents in the Eastern District of Virginia Went to trial on 5 patents in < 1 year Jury found infringement of claims in 3 patents Infringed patents: (1) 6,104,711; (2) 6,282,574; and (3) 6,359,880 No infringement found on: (1) 6,137,869; and (2) 6,430,275. Verizon dropped U.S. Patent Nos. 6,298,062 and 6,128,304 just prior to trial Jury also found no claims of the 5 Verizon patents invalid The Complaint and Result

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA 3 Result and Next Steps Damages: $58 million for past infringement; 5.5 % royalty on future sales Permanent injunction issued on March 23 Partial stay granted April 6, allowing Vonage existing customers but not new customers Emergency Relief / Review from U.S. Court of Appeals for the Federal Circuit granted on April 6 - Hearing on April 24 $66 million appeal bond + Royalty The Verizon - Vonage Decision

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA 4 Effect of Litigation on Enforcement of the Patents Patents become stronger through successful litigation Judge agreed with Verizon’s interpretation of the scope of its patents at the Markman hearing Jury trial victory establishes the patents as relevant to VoIP community Verizon may be emboldened to enforce its portfolio against other players The Verizon - Vonage Decision

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA 5 Trial Snapshot and Lessons Verizon portrayed Vonage as: –Stealing technology patented technology from Verizon –As a company that did not innovate and had no patents of its own –As a company solely driven by a profit motive –As an irresponsible company that did not bother to check whether its service would infringe anyone else’s patents The Verizon - Vonage Decision

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA 6 The Verizon - Vonage Decision Trial Snapshot and Lessons Vonage tried to portray: –Verizon as a coming late to the VoIP party –The patents as covering something totally different than Vonage’s system No substantial invalidity defense was put on! The Court’s broad Markman decision on the scope of the patents issued just before trial largely determined the outcome

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA 7 Scope of the patents USP 6,359,880 - Wireless –Claims 1, 6, 7 and 8 found infringed –Covers implementing wireless telephone communication in a packet switched network. –Focus is on locating or registering a wireless telephone with a wireless gateway system and routing between a packet switched network and a wireless telephone –Design Around / Invalidity The Verizon - Vonage Decision

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA 8 Scope of the patents 6,104,711 and 6,282, Name Translation –Both patents found infringed –‘574 patent, claim 27 infringed (30 total claims) –Infringed claim covers a 3 step method of 1.receiving a name translation request at a server coupled to a public packet switched network; 2.translating a name into a destination telephone number; 3.transmitting a reply containing the destination telephone number and packet address of a telephone gateway between the PSTN and the packet switched network. –Court interpreted “name” broadly to include a telephone number or other identifier of a party The Verizon - Vonage Decision

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA 9 The Verizon - Vonage Decision Scope of the patents 6,104,711 and 6,282, Name Translation –Certain claims not explicitly limited to “public” networks –‘711 patent, claim 20 infringed (37 total claims) –Infringed Claim covers a 3 step method of receiving a name translation request at a server coupled to a public packet switched network; executing a conditional analysis and translating the name into a first or second “destination address” based on the analysis; transmitting a reply containing the destination telephone number and packet address of a telephone gateway between the PSTN and the packet switched network. second destination address includes information relating to routing via the PSTN

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA 10 The Verizon - Vonage Decision Scope of the patents USPs 6,137,869 and 6,430,275 –Neither found infringed –Cover call session management for authenticating a subscriber and routing calls in a hybrid circuit switched and packet switched network. –They include in various aspects creating call records, tracking information like length and price of the call and techniques for least cost routing and fraud prevention.

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA 11 The Verizon - Vonage Decision Scope of the patents USP 6,298,062 and 6,128,304 –Dropped prior to trial –Cover call forwarding in a packet-switched network to, for example, forward a call to voic when subscriber line is unavailable

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA 12 The Verizon - Vonage Decision How does this affect VoIP Players? Verizon asserts its patents are broadly relevant to VoIP Should obtain copies of the patents and assess relevance to operations Work with a patent attorney on matters of interpretation and applicability of patents Consider getting exculpatory opinions to have in the file to avoid willful infringement Consider contributory infringement issues when dealing with third parties

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA 13 Check indemnities with vendors Consider design changes to avoid conflict Seek patents on design changes, innovations Collect prior art that is relevant, but not considered by the Patent Office Keep track of other Patent Holders The Verizon - Vonage Decision How does this affect VoIP Players?

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA 14 More patents are being asserted and litigated in the VoIP space The emergence of the industry invites these lawsuits Other Portfolios 1.Klausner Sued AOL seeking $200 million in damages Settled with AOL Litigating with Vonage now in ED Texas Patents cover visual and selective access to voic through a list The Verizon - Vonage Decision Other Portfolios?

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA Sprint Litigating with Vonage now in Kansas 7 patents in portfolio, all in the same "family.“ They are generally directed to establishing paths through asynchronous transfer protocol (ATM) networks and allow switching through ATM fabrics on a call by call basis, as opposed to routing all traffic through permanent virtual paths. The patents are most relevant to the extent that VOIP traffic is routed through ATM networks or network segments. The Verizon - Vonage Decision Other Portfolios?

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA Rates Technology Litigating with several companies. Prefers to offer license/settlement, but sues quickly in ED NY if settlement breaks down Patents relate to least cost routing Widely licensed prior to VoIP Gerry Weinberger targeting VoIP players 4. Web Telephony Litigating against Verizon, Vonage, Sun Rocket and others in Texas Patent covers using web browser to selectively route calls The Verizon - Vonage Decision Other Portfolios?

January 23-25, 2008 Miami Beach Convention Center Miami, Florida USA 17 –Need to be aware of the portfolios –Clearance of products and services is recommended to reduce risk –Litigation risk has increased after the Verizon case and with increasing success of the industry T he Verizon - Vonage Decision Conclusions