March 23, 2007 9:44 AM PDT
Vonage ordered to stop using Verizon VoIP patents
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U.S. District Judge Claude Hilton in Alexandria, Va., on Friday granted Verizon's request for a permanent injunction that bars Vonage from using three disputed Verizon patents. He sided with Verizon's argument that it would suffer irreparable harm if use of the patents was not terminated and rejected Vonage's argument that the injunction would harm the public interest.
Hilton opted, however, not to make the decision effective until a court hearing in two weeks. At that time, both parties will have the chance to make arguments as to whether the injunction should be put on hold while Vonage appeals.
The judge's action follows a setback dealt by a federal jury against Vonage on March 8. The eight jurors concluded that the New Jersey-based company had infringed on three of five Verizon patents at issue and ordered it to pay $58 million. Vonage has announced its intention to appeal the verdict but is waiting on the outcome of the injunction decision before it formally makes that filing.
Vonage said it is confident it will obtain a stay of the injunction from a federal appeals court if Hilton denies its initial request.
The patents Vonage was found to have infringed deal with technologies involving connection of VoIP calls to the regular phone network, some features for implementing call-waiting and voice-mail services, and VoIP calls using Wi-Fi handsets. Vonage has maintained that even if the injunction is upheld, its some 2.2 million subscribers will not encounter disruptions because it is developing a technological workaround.
"We are confident Vonage customers will not experience service interruptions or other changes as a result of this litigation," CEO Mike Snyder said in a statement.
Verizon applauded the judge's move. "We are pleased the court has decided to issue a permanent injunction to protect Verizon's patented innovations for offering commercial-quality VoIP and Wi-Fi services," John Thorne, senior vice president and deputy general counsel, said in a statement.
The lawsuit dates back to June 2006, when Verizon filed suit against its phone market rival, accusing the growing company of infringing on seven of its patents. Verizon later scaled back its complaint to include only five patents.
After hearing arguments from witnesses called by each side, the eight jurors decided earlier this month that all five patents were valid but that Vonage violated only three of them. The jury decided Vonage had not violated two patents related to billing systems designed to prevent fraud. It also rejected Verizon's argument that the infringement was willful, which could have tripled the monetary damages awarded to Verizon.
Sharon O'Leary, Vonage's executive vice president, chief legal officer and secretary, continued to defend the company's practices in a statement Friday. She said the firm "relied on open-standard, off-the-shelf technology when developing its service" and argued that court evidence failed to prove otherwise.
Vonage also faces a patent infringement suit from Sprint-Nextel, which claims the Net phone provider is infringing on seven of its patents related to the processing and delivery of voice and data packets.
Vonage shares fell 6.2 percent, or 25 cents, to $3.80 shortly after the judge's decision. Trading in the stock was then halted.Reuters contributed to this report.
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