Vonage Ordered to Pay Verizon $58 Million for Patent Infringement

Includes: S, VG, VZ
by: Judith Levy

Voice-over Internet provider Vonage was ordered by a jury yesterday to pay Verizon Communications $58 million plus a 5.5% royalty on future sales for the infringement of three patents. The jury held that Vonage's act was not "willful," meaning Verizon is not entitled to the triple damages awarded in such cases of patent infringement. Verizon, which had sued Vonage for the infringement of a total of five patents, followed the verdict with a request that Vonage be permanently barred from using Verizon's technology -- a ruling that would cripple Vonage. A hearing to decide that question will be held March 23. Vonage plans to appeal the patent verdict as well as the injunction, should it be imposed. Vonage, which has over 2 million customers, lost $286 million on revenue of $607 million last year. Verizon earned $6.2 billion on revenue of $88.14 billion. Vonage shares fell more than 4% to close at $4.84 on the news -- their lowest close since their May IPO at $17 -- and then shed another 4% in AH trading. Verizon shares gained 2.2% to close at $36.48. In related news, Sprint Nextel Corp. is seeking compensation and a court order to bar Vonage from using disputed technology.

Sources: Bloomberg, Reuters, Mercury News
Commentary: Vonage Holdings: Unsafe at Any PriceVonage Holdings: Time to Hang Up The PhoneIs Vonage Hopeless?. Conference call transcript: Verizon Q4 2006
Stocks to watch: Vonage Holdings Corp. (NYSE:VG), Verizon Communications Inc. (NYSE:VZ), Sprint Nextel Corp. (NYSE:S). Competitors: Qwest Communications International Inc. (Q), AT&T Inc. (NYSE:T)

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