Vonage Holdings has "substantially completed" the deployment of workarounds for two of three VoIP patents claimed by Verizon, Vonage announced Thursday.

Vonage, the largest independent VoIP provider, began deploying the two workarounds about July 1, Chairman and Interim CEO Jeffrey Citron said during a conference call on the company's second-quarter fiscal 2007 earnings. The two workarounds target most of Vonage's customers, with the third workaround covering wireless voice, Citron said.

"The impact of the deployment is transparent to our customers," he said.

Vonage has completed development on the third workaround, Citron added. The company consulted outside experts to make sure the workarounds do not violate Verizon's patents, he said.

Verizon sued Vonage in June 2006, accusing the smaller company of infringing seven of its patents. In March, a federal jury found that Vonage had infringed three Verizon patents and awarded Verizon $58 million. Vonage has filed an appeal of the jury's decision, and that appeal is pending.

The workarounds, which Citron didn't describe in depth, would protect the company if its appeal isn't successful, he said. "We . . . remain confident in the strength of our appeal," he added.

The court verdict has slowed subscriber growth for Vonage, Citron said. The company added about 57,000 subscriber lines during its most recent quarter, compared to 166,000 in the first quarter of fiscal 2007, and 256,000 in the second quarter of fiscal 2006. Vonage now has 2.45 million lines in service.

But Vonage officials said they were happy with their second-quarter financial results. Revenue for the quarter, which ended June 30, was a record $205.9 million, compared to $144.4 million for the second quarter of fiscal 2006.

The company's net loss for the quarter was $33.6 million, compared to $74.1 million a year ago.

Vonage's adjusted loss from operations, excluding one-time charges such as $6 million in patent legal bills, was $3.1 million. The company cut marketing costs, and is working on cutting back office expenses, Citron said.

"I am confident we are taking the appropriate steps for turning our business around," Citron said. "I believe we are turning the corner on one of the most difficult periods in Vonage's history. We are close to achieving positive adjusted operating profit."

The IDG News Service is a Network World affiliate.