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Communications, Internet

Jury: Vonage Owes Verizon $58M


By Cassimir Medford

Cassimir Medford

Struggling Internet phone service provider Vonage Holdings suffered another blow Thursday after a federal jury ordered it to pay Verizon Communications $58 million in damages for infringing on the telecommunications giant’s patents.

The Virginia jury found that Vonage had infringed on three of Verizon’s patents. The VstoIP upstart was also ordered to pay a 5.5 percent royalty to Verizon on future Vonage sales.

The decision should put other VoIP providers on alert because the patented technology at the heart of Verizon’s lawsuit is fairly common at other Internet calling companies, said John Rabena, a patent attorney with Washington, D.C.-based Sughrue Mion PLLC. Mr. Rabena said those startups should be looking to install technical work-arounds in order to avoid the possibility of being sued by Verizon.

Mr. Rabena added that VoIP providers might also consider enhancing their own patent portfolios to improve their chances of negotiating cross licenses in the event they are targeted by Verizon.

“If Vonage had a strong patent portfolio there is a good chance they could have negotiated a cross license with Verizon and not be in this predicament,” he said.

Verizon said Vonage violated several patents it holds that pertain to connecting Internet calls to ordinary phone lines. Verizon sought a 19 percent royalty in a lawsuit it filed in U.S. District Court in Alexandria, Virginia, last June.

Vonage said it will be able to continue operating by implementing work-around technologies to take it out of further legal harm’s way. The VoIP carrier noted that Verizon sued on seven instances of patent infringement but only won on three counts. The company said it expected the jury’s verdict to be reversed on appeal.

Vonage’s shares tumbled 10 percent to $4.50 after the verdict was announced. The VoIP company’s share price regained some of the lost ground as it ended the day at $4.86.