James Middleton

March 9, 2007

2 Min Read
Vonage loses

Vonage Holdings on Thursday lost its patent dispute with Verizon Communications and was ordered to pay it $58m (£30m) plus monthly royalties if it continues to use the proprietary patents..

Immediately after the case, Vonage assured its 2.2 million customers that their service would not be affected by the outcome of the case.

The eight-person jury found in favour of Verizon after failing to come to a decision Wednesday. The question remains whether or not District Judge Claude Hilton will accept Verizon’s request to bar Vonage from using the patents in the future.

“If the trial court does impose an injunction, we will seek an immediate stay from the Federal Court of Appeals,” Vonage said in a statement.

The award of $58m is much less than the $197m that Verizon had requested – partly because the jury found that Vonage did not act willfully. Had the jury found otherwise it is understood the award could have been significantly higher.

Vonage, said it would appeal against the verdict and ask for an immediate stay of any court order halting its use of the disputed technology.”We expect that verdict to be reversed on appeal,” Vonage said in a statement. “In addition, we don’t believe there is any basis to support Verizon’s request for an injunction.”

Judge Hilton set a March 23 hearing for arguments on whether he should issue an injunction.

Vonage, which priced at $17 per share in its initial public offering in May 2006, is rated as the worst-performing IPO in the past 15 months, according to analysts.

Following the ruling, there is some speculation that Verizon may now be clear to launch suits against other companies using VoIP. According to the US Patent & Trademark Office, there are 2,273 VoIP patents. Most are owned by companies including Verizon, AT&T, Motorola, Broadcom and Cisco.

Jan Dawson, VP at analyst, Ovum, said: “This is clearly a victory for Verizon, whether you take the cynical view that the company is trying to knock out an upstart competitor or the face value view that it is seeking to protect its patents. The $58m payout Vonage is required to make is in the same range as quarterly losses at Vonage, so losses would double if it came in the next quarter. Of course, none of this changes the fact that Vonage is still hopelessly unprofitable but it does make a bad situation worse.”

Dawson added: “It remains to be seen whether Verizon will go after other companies using similar technology once this case is over. While Vonage is the largest standalone VoIP provider in the US, it is certainly not the only one. This case could have a ripple effect across the whole VoIP market.”

About the Author(s)

James Middleton

James Middleton is managing editor of telecoms.com | Follow him @telecomsjames

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