May 3, 2007 10:40 AM PDT

Court rejects Vonage bid for patent case retrial

A U.S. appeals court has denied Vonage's request for a retrial of a patent case it lost against Verizon Communications earlier this year.

The U.S. Court of Appeals for the Federal Circuit refused to grant the motion late on Wednesday. Vonage had asked the court in a motion filed Tuesday to send the case back to a lower court for a new trial based on a Supreme Court decision handed down Monday that could make it easier to challenge allegedly obvious patents.

In March, a jury found that Vonage had infringed three patents owned by Verizon, the second largest phone company in the United States. Vonage's appeal of the verdict is scheduled for a hearing on June 25.

Vonage said it is still confident that it will win its appeal in the case. The company has repeatedly stated that it believes the verdict was based on an interpretation of the patents that was too broad. The company has also argued that the patents are invalid because there were plenty of other companies that had filed patents for similar technology.

"Although we're disappointed that the appeals court denied our request for a retrial, this ruling has no impact on our appeal, which continues to move forward," said Brooke Schulz, a spokeswoman for the company. "We believe our appeal is strong, and are pleased the court has given us the option to use the expanded obviousness test for patent validity in our arguments before them."

The Federal Circuit has already granted Vonage a permanent stay during the appeals process on an injunction ordered last month that would have prohibited the company from signing up new customers.

Vonage used the KSR International v. Teleflex case--which involved a dispute about patents on gas pedal designs and the extent to which combinations of elements can be patented--to argue that the outcome of its trial with Verizon may have been different if the jury had been given instructions reflecting the high court's new ruling.

In a motion filed Tuesday, Vonage's lawyers argued that the jury in the original trial based its conclusion on a stricter set of tests of law than what the Supreme Court's latest ruling suggests. And as a result, questions remain about whether the patents at issue are even valid. Vonage's motion suggested that the appeals court need not waste its time reviewing the merits of the lower court verdict if validity of the patents remains up in the air and should instead order a new trial.

Verizon on Wednesday asked the court to reject Vonage's request for a retrial, stating that the company was simply using the Supreme Court ruling as a stall tactic. Verizon said that Vonage should use the appeals process to argue its points and not ask for a new trial.

Verizon also said that Vonage's "hastily filed separate motion" raised issues that should be left to the regular appeals process and did not warrant an entirely new trial. The company contended that Vonage's arguments are "so lacking in merit that they should be summarily rejected."

Specifically, Vonage did not argue in its Tuesday motion that the patents it was found to have infringed were obvious and therefore invalid, Verizon said. Instead, Vonage argued only that the jury instructions given in the case relied too heavily on the test for patent obviousness that the Supreme Court declared too rigid.

Verizon also disagreed with Vonage's assertion that the jury instructions were overly rigid. Its attorneys said Vonage's lawyers could have objected to the language, particularly if they suspected the Supreme Court's imminent ruling might influence it, but they never did.

Verizon representatives didn't respond to requests for comment on this latest news.

In the end, the appeals court sided with Verizon and denied Vonage's request for a new trial. But the court did say that Vonage is free to cite the Supreme Court ruling as part of its regular appeal.

A long shot
Still, many experts following the case say Vonage's argument based on the obviousness of the patents is a long shot.

"We'll need to see what, if any, additional arguments or facts Vonage makes regarding the impact of KSR on its appeal," said Rebecca Arbogast, vice president at the investment firm Stifel Nicolaus and law professor at Johns Hopkins School of Public Policy. "But in my view, unless they marshal something new, I don't see the Federal Circuit granting a new trial based on KSR."

Susan Pan, a partner at the law firm Sughrue Mion agrees. She said that unless Vonage's case fits almost exactly to the KSR v. Teleflex case, the company will have a difficult time winning its appeal based upon this argument. Pan explained that the Supreme Court's decision will likely have more impact on preventing frivolous patents from being issued and may not make a big impact on litigation involving existing patents.

"I don't see this case as a sea change in the law," Pan said. "And unless Vonage can argue that its situation is very similar to that in the KSR case, I don't see their chances changing either way on their appeal."

See more CNET content tagged:
Vonage Holdings Corp., patent, appeal, Verizon Communications, verdict

5 comments

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I hate Verizon even more now
I dumped my expensive Verizon wireline service to switch to VOIP using Vonage. If Verizon has some misguided idea the suing Vonage will bring their customers back they have another thing coming.

Even if Vonage did violate some patents, I think it would be hard to show that those violations have cost Verizon money. I mean, there are other VOIP providers out there and Vonage has not gone after them yet.

Go ahead Verizon, Drive Vonage out of busines, I'll just switch to an even less expensive VOIP provider like SunRocket or something. You can be sure that I'll never do business with you and put up with your lousy service and Indian Call Centers
Posted by felgercarbnaysay (49 comments )
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correction
I meant to say the Verizon has not gone after other VOIP providers yet.
Posted by felgercarbnaysay (49 comments )
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Way bigger then Microsoft vs Netscape
This is just huge but I really hope it gets solved quickly. Vonage isn't going anywhere and should be allowed to conduct their business, If they should pay a minor fee then everyone including Comcast should pay those minor fees.

Let's move forward. I hope that can be done this summer or quicker. This is too out of control. It's hurting allot of stocks severely and frankly hurting allot of other stocks a great deal including Microsoft.
Posted by Blito (436 comments )
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Stick it to Verizon!
They can hire a whole pack of people to follow me around....and
who actually WANTS that....and it will never lure me back to
Verizon. Anything that gets customers away from Verizon is
GREAT in my eyes! I'm dealing with all kinds of illegal billing
issues, false charges and endless LIES, LIES, LIES!!!! I say if
Vonage can produce a product for less money and not rob the
public, all the power to them!
Posted by zoesgarden (2 comments )
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Drunken Rep Syndrom...
All this hate must be from the drunken rep syndrom... no wonder their reps come to work drunk!

<a class="jive-link-external" href="http://www.buyers-nightmare.com/drunken-verizon-rep-attempting-to-solicit-business-services" target="_newWindow">http://www.buyers-nightmare.com/drunken-verizon-rep-attempting-to-solicit-business-services</a>
Posted by cjonesrun (1 comment )
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