Vonage is fighting possible bankruptcy, need for a new CEO and investor frustration. While the potential for it to escape Verizon’s litigation grip has

Vonage has invested heavily in marketing to acquire its customers: $310 million for 166 thousand customers this quarter alone as noted in its recent quarterly update. Vonage management notes that this works out to paying $275 to acquire a new customer. Uncertainty about the company’s survival does not help in winning new customers, no matter how snappy an ad campaign used. This brand investment has forged the company as synonymous with VoIP – an asset not so easily thrown away. Additionally, a company without a permanent CEO could be viewed as an asset when considering a sale.

The Supreme Court KSR ruling has made a dramatic change in how patent obviousness is assessed by the courts and has an immediate impact on patent enforcement cases. A number of critics have decried the Verizon patents as obvious and an in depth review by potential suitors should dig into just that analysis.

While appropriately exhausting a potential work around, Vonage’s major investors should also consider strategic alternatives to sell the assets of the business (e.g. Vonage Holdings would still exist, but it would agree to sell accounts, IP, etc) either to a competitor or to a newly formed entity. Could Verizon sue again? Yes. Will the outcome be the same? Perhaps not. A review of the issues related to obviousness on Verizon’s patents is critical to this move, but if the first Federal Circuit case is a sign of leaning towards defendants by invalidating more claims, this may be a windfall investment for the acquiring company, and a means for Vonage’s current board to end the frustration.

The patents in question are: US 6104711, US 6287574, and US 6298062