Vonage Told to Stop Using Verizon Technology

March 24, 2007
Vonage Told to Stop Using Verizon Technology

By IAN AUSTEN
A federal judge said yesterday that he would order Vonage Holdings, the Internet-based telephone service, to stop using technologies patented by Verizon Communications.
The decision, which could force Vonage to close or to install new systems, follows a jury decision this month that awarded Verizon $58 million and monthly royalties.
But the judge agreed to postpone the effective date of the injunction for two weeks while he considers a request by Vonage for a stay pending what could be a lengthy appeal.
The decision forced a temporary halt in the trading of Vonage shares and eventually sent the companyâ€™s stock down $1.05, or 26 percent, to close at $3. Vonage began trading last May at $17 a share.
â€œFor Vonage, everything that can go wrong has gone wrong,â€ said Richard Greenfield, the co-head of Pali Research in New York. â€œThe constant stream of bad publicity has got to be adding to customer churn.â€
As it did earlier this month, Vonage quickly moved to assure its two million customers that their service would not be affected. It has said it is developing alternative technology that does not conflict with Verizonâ€™s patents.
â€œWe are confident that Vonage customers will not experience service interruptions or other changes,â€ the companyâ€™s chief executive, Mike Snyder, said in a statement. â€œOur fight is far from over. We remain confident that Vonage has not infringed on any of Verizonâ€™s patents.â€
Brooke Schulz, a spokeswoman for Vonage, said the company had not seen any effect on its ability to attract and retain customers because of the case.
â€œWe believe this case has had not impact on churn to date, nor do we expect it to,â€ she said.
Judge Claude M. Hilton of Federal District Court for the Eastern District of Virginia in Alexandria said yesterday that an injunction was necessary because fines and royalties will â€œnot prevent continued erosion of the client base of the plaintiff,â€ The Associated Press reported from Alexandria.
Vonage has been the early leader in an attempt by several companies to shift traditional telephone company customers to Internet-based calling.
â€œWeâ€™re pleased the court has decided to issue a permanent injunction to protect Verizonâ€™s patented innovations,â€ said John Thorne, a senior vice president and deputy general counsel at Verizon.
The three patents that a jury found Vonage to be infringing upon involve the way the company moves calls to and from the Internet from the conventional telephone system, methods for giving customers calling features like call waiting, and means for providing Internet calling through wireless networks.
If Vonage is forced to switch to other technologies, the cost and feasibility of such a change is not clear. It is believed that the company has the ability to make remote software updates in devices that its customers have installed at their homes and offices.
Many conventional telephone companies hold patents involving Internet calling. Vonage faces a separate patent lawsuit from Sprint Nextel that has yet to go to trial.
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http://www.nytimes.com/2007/03/24/technology/24phone.html?ref=technology

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Vonage Told to Stop Using Verizon Technology

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Vonage Told to Stop Using Verizon Technology

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