Vonage (VG) On The Ropes Again; Violated Sprint (S) Patents, Owes $70mm Damages, Facing Injunction


More bad news for Vonage (VG): A jury in Kansas City says the Internet phone company infringed six patents owned by Sprint Nextel (S). Vonage has been ordered to pay $69.5 million in damages, plus a 5% royalty on future revenue, Bloomberg reports. Most important: Sprint will ask for an injunction that could shut Vonage down.

That’s what Verizon came close to pulling off in April, when the company won its own patent battle. In that case, Verizon received damages of $66 million plus 5.5% royalty on future revenues — it also won an injunction that prevented Vonage from signing up new customers, but that ruling was eventually mothballed. Last month, Holmdel, N.J.-based Vonage said it had “substantially completed” workarounds to do business without violating Verizon-owned patents.

“We do anticipate seeking a permanent injunction. We’re extremely pleased with the verdict and view it as validation of the strength and depth of our patent portfolio,” Sprint spokesman Matthew Sullivan wrote in an email to Silicon Alley Insider this afternoon. In a statement, Vonage said it would appeal the ruling and “In addition, we will seek to develop technological workarounds that don’t infringe on Sprint’s patents.” (Full Vonage statement after the jump.)

See Also: Vonage: About That Churn Problem, Struggling Vonage Stumbles With “Visual Voicemail”

Vonage to Appeal Court Decision in Sprint Patent Suit

HOLMDEL, N.J., Sept 25, 2007 /PRNewswire-FirstCall via COMTEX News Network/ — Vonage announced that it will seek to overturn today’s U.S. District Court jury verdict in a patent infringement lawsuit brought by Sprint Communications Company L.P. and continue focusing on providing reliable, quality digital phone service.

Federal court jurors in Kansas City, Kansas ruled in favour of Sprint, finding that Vonage had wilfully infringed Sprint’s patents in providing its VoIP telephony services, and awarding $69.5 million in damages, which the jury found to be five per cent of Vonage’s revenues over the infringing period. Vonage will ask the court to set aside the verdict, and if it is not granted, will vigorously pursue an appeal of the decision, including the underlying issue of liability and the willfulness aspect. Vonage believes any damages awarded are inappropriate. In addition, we will seek to develop technological workarounds that don’t infringe on Sprint’s patents.

“We are disappointed that the jury did not recognise that our technology differs from that of Sprint’s patents,” said Sharon O’Leary, chief legal officer for Vonage. “Our top priority is to provide high-quality, reliable digital phone service to our customers. Vonage has already demonstrated that it can keep its focus on customers and on its core business while managing ongoing litigation,” she added.