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Vonage Dealt Another Blow as Judges Issues Injunction

3/23/2007 02:07:00 PM Eastern

Alexandria, Va. — Vonage should be barred from using VoIP technology owned by Verizon, a federal judged ruled.

The judge issued a permanent injunction on March 23 preventing the Holmdel, N.J.-based VoIP provider from using technology patented by Verizon. Two of the patents in question concern how Internet calls connect to the PSTN network; the third impacts wireless VoIP communications.

The ruling follows an earlier jury decision that found Vonage guilty of violating three of seven Verizon patents. Vonage was fined $59 million and forced to pay 5.5 percent of royalties on future sales.

Immediately following the decision, Vonage released a statement noting that the injunction would not take effect immediately and that the company “is confident its customers will see no change in their phone service.”

The court will hear a stay argument in two weeks. If the court rebuffs Vonage’s attempt, the company plans to seek a stay through the Federal Circuit Court of appeals.

"Our fight is far from over," said Mike Snyder, Vonage, CEO. "We remain confident that Vonage has not infringed on any of Verizon's patents — a position we will continue vigorously contending in federal appeals court — and that Vonage will ultimately prevail in this case."

“It’s a tough break for a company that doesn’t seem to catch a break,” said Stephan Beckert, research director, TeleGeography. It remains an open question whether the legal onslaught will substantially cripple the company or force them to the negotiating table with Verizon, he said.

“When you look at the 5.5 percent of royalties, that’s about $1.50 per customer,” he said. “If Vonage passes that onto their customers, they’re still a very inexpensive” phone service, Beckert said.

A larger issue could be the nature of Verizon’s patents, Beckert said. Depending on the specific technology at issue, other VoIP providers could be vulnerable to similar lawsuits, he said.

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