Judge rules against Vonage on patents

A federal judge on Friday issued a permanent injunction against Internet phone carrier Vonage for use of rival Verizon Communications Inc.'s patents.

Judge Claude Hilton said an injunction, which followed a jury decision that Vonage had infringed on three Verizon patents, is required because simply providing monetary damages "does not prevent continued erosion of the client base of the plaintiff."

Hilton said he will not formally enter the injunction for another two weeks while he considers Vonage's request to stay the injunction. Vonage is requesting a stay of either 120 days or until its appeal is heard.

But Verizon lawyer Dan Webb said any of Vonage's business difficulties should not be a factor in determining a stay. Webb said a stay will cause irreparable damage to Verizon because Vonage will continue to lock up the marketplace of Voice over Internet Protocol, or VoIP.

Webb said New York-based Verizon has already lost hundreds of thousands of customers to its competitor. Webb said Vonage officials have spent $425 million advertising their product "so they can lock up this emerging market and we can't get a toehold in it."

He also said a permanent injunction is required because Vonage "is a company that is in deteriorating condition in the marketplace." He said the company could run up future monetary damages and then be unable to pay.

Vonage lawyer Roger Warin argued that appeals are more frequently successful in the appellate court that hears patent claims. He said that should be a factor in issuing a stay.

Vonage Holdings Corp., based in Holmdel, N.J., has been vague in describing how an injunction would affect its services. It filed a legal brief on the issue under seal.

But shortly after the jury verdict earlier this month, Vonage reassured its 2.2 million customers that service will not be affected by the court case, indicating that it would deploy different technologies to work around the patents in question.

Warin said Verizon is misstating the facts to suit its purposes.

Verizon sued Vonage last year for infringing on five patents it said makes the Internet telephone service network functional. On March 8, the eight-person jury found that Vonage had infringed on three of them. And it ruled that Vonage must pay $58 million, plus possible future royalties, to Verizon. That was far less than the $197 million that Verizon had requested, and was even slightly less than what Vonage had suggested would be fair if it were found liable.

Vonage shares fell 51 cents, or 12.6 percent, to $3.54 in afternoon trading on the New York Stock Exchange after sinking to a new 52-week low of $3.30. Verizon shares rose 39 cents to $38.40 on the NYSE.