Vonage Loses Another Patent Case, This Time To Sprint

Includes: S, VG, VZ
by: Larry Dignan

A federal jury has ruled that Vonage (NYSE:VG) has to pay $69.5 million in damages to Sprint Nextel (NYSE:S) for using its patents.

The verdict, reported by Bloomberg and Reuters, also means that Vonage has to pay Sprint a 5 percent royalty on future revenue. The decision was handed down in a Kansas City, Kansas courtroom. Vonage, which lost a similar case to Verizon (NYSE:VZ), is likely to appeal the ruling.

For those keeping score of the patent wars, Vonage is 0-2 and the finances are running low. Verizon won a patent infringement case in March and Vonage had to fork over $58 million in damages that go round. Vonage also has to pay a 5.5 percent royalty. Vonage has slowed the bleeding some, but $127.5 million in penalties and a chunk of future revenue don’t bode well for the company.

Vonage appealed the Verizon ruling and will appeal the Sprint verdict too. These appeals are likely to take months if not years to decide so Vonage won’t have to pay up this minute. The big question is whether Vonage will have enough cash to hold out if it loses those appeals. Meanwhile, lawyers cost money too.

In the meantime, here’s Vonage’s response:

Federal court jurors in Kansas City, Kansas ruled in favor of Sprint, finding that Vonage had willfully infringed Sprint’s patents in providing its VoIP telephony services, and awarding $69.5 million in damages, which the jury found to be five percent of Vonage’s revenues over the infringing period. Vonage will ask the court to set aside the verdict, and if it is not granted, will vigorously pursue an appeal of the decision, including the underlying issue of liability and the willfulness aspect. Vonage believes any damages awarded are inappropriate. In addition, we will seek to develop technological workarounds that don’t infringe on Sprint’s patents.

Russell Shaw has more.