A U.S. district court judge Friday barred VoIP provider Vonage from signing up new customers after the company lost a patent infringement lawsuit to Verizon. The judge in the case denied Vonage’s request to stay an injunction pending its appeal of a patent infringement ruling. On March 8, a federal jury found that Vonage infringed three Verizon patents and must pay $58 million in damages plus royalties. Verizon sued Vonage last June, alleging the VoIP provider had violated seven of its patents involving packet-based calling technology.
A U.S. district court judge Friday barred VoIP provider Vonage from signing up new customers after the company lost a patent infringement lawsuit to Verizon. UPDATE: An appeals court late on Friday issued a temporary stay, allowing Vonage to continue signing up new customers until the appellate court can hear Vonage’s request for a permanent stay. On March 8, a federal jury found that Vonage infringed three Verizon patents and must pay $58 million in damages plus royalties. Verizon sued Vonage last June, alleging the VoIP provider had violated seven of its patents involving packet-based calling technology.
Here are some questions and answers to the what, why and how of today’s ruling.
Is Vonage fried now that a federal judge ruled Friday that it is barred from signing new customers?
No, but this doesn’t bode well for the VoIP service provider. Vonage’s own lawyer called the ruling “as devastating as an injunction that would have affected Vonage’s 2.2 million existing customers,” according to an article in USA Today.
See related story on how some observers question company’s future following latest setback.
What type of injunction could have affected Vonage’s customers?
The original injunction handed down by the court in late March barring Vonage from using the technology named in Verizon’s patents. The injunction came after Vonage was found guilty of patent infringement. But the injunction didn’t go into effect immediately. The judge decided to take a different route instead limiting the company’s growth while it settles its legal woes.
What do the Verizon patents that were violated include?
The three patents cover technology for transferring voice calls from an IP network to a traditional telephone network; supporting call waiting features; and providing wireless handset support for VoIP customers. For more details on the Verizon patents, check out our story.
Why did the judge bar Vonage from signing new customers?
As punishment for infringing on Verizon’s technology patent even after a jury found Vonage guilty of doing so last month. If Vonage stops infringing on Verizon’s patents then it could sign on new customers.
So why doesn’t it stop?
That would require one of two things. First, it could create a technical “work around” and is said to be working on that today. Second it could come to an agreement with Verizon and pay it royalties moving forward. That’s most likely what will happen.
Didn’t Vonage recently have an IPO? So why doesn’t it have cash to fix the problem?
Yes it did have an IPO, but it has been lackluster at best. Late last month a financial analyst speculated that Vonage could be bankrupt within two years.
Can it survive if it doesn’t sign new customers?
The short answer is no, not in the long term. According to a story in the Wall Street Journal “adding new subscribes is critical for Vonage, which promised investors it will grow quickly and reach profitability.” That simply can’t happen without new revenue.
Isn’t Vonage required to pay Verizon damages? Doesn’t that settle the score?
In early March, a jury found that Vonage did infringe on three Verizon patents and that Vonage must pay $58 million in damages plus royalties to Verizon. But the judge wasn’t satisfied with that payment alone while Vonage continues to infringe on Verizon’s three patents. The judge is also requiring Vonage to post a $66 million bond, according to the Associated Press.
When does the judge’s injunction, barring Vonage from signing on new customers go into effect?
April 12.
What’s Vonage’s next step?
An immediate appeal, company lawyers said Friday.
If a higher court sides with Vonage are its legal troubles over?
No. Sprint Nextel filed suit against Vonage in a patent infringement case in October 2005. That case is expected to go to trial in September.
