Vonage, Verizon Settle Patent Fight: Up To $117.5 Million

Vonage has finally settled its patent war with telecom giant Verizon. It will be costly: up to $117.5 million. But most important: Vonage won’t have to shut down its network or pay Verizon a chunk of its monthly revenue.

Vonage’s payment will be variable: it will depend on how many patents an appeals court says Vonage violated. Last month, a Federal appeals court upheld most of a March patent verdict against Vonage, saying that it infringed two patents owned by Verizon (VZ). The court also affirmed an April injunction that bars Vonage from using the two patented technologies. Vonage had been granted a stay on that injunction during its appeal.

If Vonage wins a rehearing on either of the two patents, or if the court tosses the injunction, Vonage will pay Verizon $80 million. If Vonage doesn’t win a rehearing on either patent, or if the stay is lifted, Vonage will pay Verizon $117.5 million, plus another $2.5 million to “certain charities.” Shares are up 80% to $2.80 in after-hours trading.

Vonage is not yet in the clear. Once the Verizon settlement is finalised, it will still have to deal with another patent suit with AT&T (T). Earlier this month, Vonage settled a patent suit with Sprint Nextel (S) for $80 million.

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