Vonage (VG) In Flux, Another Court Battle Looms


Will Vonage (VG) shut down or can it keep its Internet phone network intact?

A Federal appeals court today upheld most of a March patent verdict against the Internet phone provider, saying that it infringed two patents owned by Verizon (VZ), Reuters reports. More importantly, the court also affirmed an April injunction that bars Vonage from using the two patented Verizon technologies. The injunction should kick in within a month; Vonage was able to get a stay while its appeal was in process.

The question is whether a set of technology workarounds will keep Vonage afloat. “In light of the workaround technology that Vonage has developed and deployed, today’s decision is not expected to have an adverse impact on Vonage’s business,” the company said in a release today, adding that workarounds “have been deployed for a while.” If the workarounds survive Verizon’s scrutiny, Vonage should be fine —  for now.

The ruling comes a day after a jury in Kansas City said Vonage infringed six patents owned by Sprint Nextel (S). In that case, Vonage was ordered to pay $69.5 million in damages, plus a 5% royalty on future revenue. Sprint will also ask for an injunction that could shut Vonage down. Shares dropped 25% Wednesday, trading below $1 for the first time.

The Verizon case now goes back to the district court for more proceedings on a third patent and a recalculation of how much money Vonage will have to pay Verizon for the infringement. Previously, Verizon was awarded damages of $66 million plus 5.5% royalty on future sales.

See Also: Vonage On The Ropes Again; Violated Sprint Patents, Owes $70mm Damages, Facing Injunction, Vonage: About That Churn Problem, Struggling Vonage Stumbles With “Visual Voicemail”