Vonage Ordered To Stop Using
Verizon VoIP Technology

Barry Levine,
Sat Mar 24, 11:27 AM ET

A U.S. District judge on Friday ordered Internet phone service provider Vonage to stop using Verizon technology to connect to standard phone lines.

In a courtroom in Alexandria, Virginia, U.S. District Judge Claude Hilton granted Verizon's request to block Vonage, but the permanent injunction will not be signed before an April 6 hearing, where Vonage will request a stay. Vonage has asked for a stay of 120 days or until its appeal is decided.

Although this decision could potentially have a major impact on Vonage's ability to offer a complete phone service to its 2.2 million customers, Vonage said it will not, as the company will switch to technological alternatives so that its business would not be affected.

"Our fight is far from over," said Vonage CEO Mike Snyder.

A Very Difficult Spot

Earlier this month, an eight-person jury found Vonage guilty of infringing three Verizon patents and awarded Verizon $58 million, as well as 5.5 percent royalties on future Vonage sales. In his decision, Hilton said that cash was not enough because Verizon continued to suffer "erosion of the client base."

Verizon had sued Vonage in June of last year, saying it had lost hundreds of thousands of customers to the VoIP provider and that Vonage had spent millions of dollars in advertising to grab VoIP market share using technology patented by Verizon.

Vonage is in a "very difficult spot," said William Stofega, research manager for VoIP services at technology research firm IDC. "They are going to have reinstill a sense of confidence, fast," he said. "This is in addition to the legal costs and, if they lose on appeal, the cash settlement and royalties. You can't have a service that is under a cloud."

He predicted that the decision would not have a huge impact on other VoIP providers, as they have taken different technological routes.

Patent Problems

"Vonage has created its own packages and technologies, crafted its own solutions," he said, which apparently have stepped on some Verizon patents. But other VoIP providers have purchased technologies or made other arrangements, he said.

"You notice that Verizon hasn't gone after other providers," he noted. For businesses that currently have a Vonage account, he said that "you at least want to think about an alternative."

The Verizon patents involve a method for translating calls from the Internet to standard phones, as well as call-waiting features. The jury found that there was infringement for three of the five disputed patents. Verizon had originally sought $197 million in damages.

The Holmdel, New Jersey-based Vonage had argued that the patents should not have been granted in the first place.

In addition, in another case that is expected to go to trial in the fall, Sprint Nextel is seeking a court order and cash compensation from Vonage, also because of technology issues.


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