Last year, IDT set up a patent-holding company called Innovative Communications Technologies Inc., or ICTI, and armed it with patents it had from its 2006 merger with Net2Phone, a VoIP company.
ICTI filed three similar complaints in the Eastern District of Virginia against Vivox, Inc., ooVoo LLC and CommuniGate Systems, Inc. claiming they are infringing on Voice over Internet Protocol patents held by ICTI.
The three companies offer video chat, among other services. IDT is a public telecom company with $1.34 billion in annual revenue that provides phone services, including prepaid calling cards. Its only history of patent litigation was a lawsuit against eBay and Skype involving some of the same patents, which was settled in 2010 on undisclosed terms.
While the lawsuits and IDT statements say that these patents are critical for any VoIP provider, back in the 1990s, the VoIP space was actually quite competitive.
Glenn Hutton, one of the original inventors and holders of the patent, had no idea his patent is being used to sue three more VoIP companies – just like he did not find out it was being used to sue eBay and Skype, until he stumbled across an online post.
Hutton, who does not stand to profit from IDT’s lawsuits based on his original patents, feels coolly toward the court system. “Personally I hate attorneys. I despise them immensely,” Hutton said.
“The deal is, you have to let go of the baby,” Hutton said of his patent. “They grow up, and they go away, and that’s it,” Hutton said. “It’s a shame that things have gotten to the level that they have, but that’s business, that’s what happens.”
Originally, IDT planned to spin off ICTI as a separate, publicly traded patent-holding company. Company directors believed that by doing so, they were insulating the parent company from a possible counter-suit, a common tactic when operating companies sue each other.
In a March letter to shareholders, IDT lawyers explained as much, writing that the spin-off “mitigates the risk of counterclaims since ICTI does not anticipate engaging in business activities.
But three months later, the company’s board abruptly changed its mind, deciding to keep ICTI as a subsidiary and terminating its registration with the SEC. In a recent financial statement, the company stated that giving the patents to “an independent entity” would actually increase risk.
Like most companies in the telecom sector, IDT has traditionally been in the position of defending itself from patent-holding companies—not creating them. That makes its decision to roll out the ICTI lawsuits a potentially controversial one, regardless of the holding company’s structure.
For now, ICTI’s only actions have been filing these lawsuits. David Callahan, a lawyer at Kirkland & Ellis who is representing ICTI, said there are “probably other potential infringers,” besides the three defendants. And as for any other business practices, Callahan said ICTI has other projects “that they may be rolling out, but I wouldn’t want to steal their thunder.”