Vonage wins permanent stay of patent ruling

"Business as usual" for VoIP pioneer as it awaits appeal in Verizon case

Vonage this week received a permanent stay of injunction from the U.S. Court of Appeals for the Federal Circuit in Washington D.C. that would have barred it from signing up new customers.

Vonage sought the stay following an April 6 decision by the U.S. District Court in Alexandria, Va. enjoining the company from using certain VoIP technology to add new customers. The court ruled that the VoIP technology Vonage was using infringed on three patents awarded to Verizon.

The permanent stay enables Vonage to add new customers as the company pursues an appeal to that ruling. Existing customers remain unaffected by the company's ongoing patent litigation, Vonage said.

"We thank the appellate court for its thoughtful consideration of the merits of our case," said Jeffrey Citron, Vonage chairman and interim CEO, in a statement. "It's business as usual for us."

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Vonage this week received a permanent stay of injunction from the U.S. Court of Appeals for the Federal Circuit in Washington D.C. that would have barred it from signing up new customers.

Vonage sought the stay following an April 6 decision by the U.S. District Court in Alexandria, Va. enjoining the company from using certain VoIP technology to add new customers. The court ruled that the VoIP technology Vonage was using infringed on three patents awarded to Verizon.

The permanent stay enables Vonage to add new customers as the company pursues an appeal to that ruling. Existing customers remain unaffected by the company's ongoing patent litigation, Vonage said.

"We thank the appellate court for its thoughtful consideration of the merits of our case," said Jeffrey Citron, Vonage chairman and interim CEO, in a statement. "It's business as usual for us."

Some Vonage users believe they won a stay too -- but only a temporary one.

"It's a breather for Vonage, but only that," says Mark Leahy, a project manager for IBM Global Service's American IT services department.

"I don't see it as the end of the argument -- just a way for Vonage to survive until they resolve the rest of the case (and the Sprint case, too)," he says. "Right now, anything extending Vonage's survival is good news for them, and thus for me."

Vonage will continue to serve existing customers by paying into escrow a quarterly royalty of 5.5% throughout the appeals process and by posting a $66 million bond as required by the court. The company says its current cash position allows it to pay these fees to secure the stay as it continues to make progress on workaround solutions and pursues its legal appeal over the coming months.

Vonage says it remains “highly confident” in the strength of its appeal.

The company said it believes the original verdict defined the patents in an overly broad in a “legally unprecedented way." Vonage said it believes the district court's decisions repeatedly neglected well-established law on claim construction and, as a result, artificially expanded the coverage of Verizon's patents beyond what was intended by the patent trademark process.

Vonage believes the appeals court will interpret the patents correctly.

"We continue to believe we have not infringed on any of Verizon's technology and remain optimistic that we will ultimately prevail in this litigation," Citron stated.

The court order granting the stay also set the schedule for appeal. Vonage has to present its opening brief May 9, Verizon, May 23, and then Vonage can reply May 30.

Oral arguments are slated to be heard June 25.

Despite this week's ruling, Verizon seemed encouraged by the pace of the appeal process.

"The court of appeals set a very short schedule for hearing Vonage's appeal," said John Thorne, Verizon senior vice president and deputy general counsel. "The expedited schedule will accomplish the same thing that a partial stay of the injunction pending a longer appeal would have accomplished -- limiting Vonage's infringement during the appeal. An appeal could have taken a year or longer; now it will be argued in just two months. We expect the unanimous jury verdict of infringement will be upheld."