Vonage Gets Relief from Order to Stop Signing Customers

Vonage, which earlier today was stopped by a federal judge from signing up new customers, late Friday was given a temporary stay of the order.

A U.S. district court judge earlier in the day barred VoIP phone service provider Vonage from signing up new customers after the company lost a patent infringement lawsuit to Verizon Communications.

Vonage secured a temporary stay from the U.S. Court of Appeals for the Federal Circuit, in Washington, D.C., according to a Vonage press release. The stay enables Vonage to continue to sign up new customers until the appellate court can hear Vonage's request for a permanent stay.

The temporary stay was granted just a few hours after U.S. District Judge Claude Hilton, in Alexandria, Virginia, issued an order barring Vonage from signing up new customers, though the order said the company could continue to serve its existing 2.2 million customers.

Background

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 (voice over Internet Protocol) provider had violated seven of its patents involving packet-based calling technology.

Hilton issued a permanent injunction against Vonage in late March, but delayed its implementation while considering Vonage's request for a stay. Vonage has said it would appeal the injunction to a higher court if it failed with Hilton.

Vonage had said that current customers won't be affected by the injunction.

Verizon's Reaction

Verizon had praised Hilton's decision, saying it expected the judge's ruling to be upheld on appeal.

"Judge Hilton exercised the court's equitable discretion to craft a middle path that allows Vonage to continue serving its existing customers while protecting Verizon's patents from increased infringement during the appeal process," John Thorne, Verizon senior vice president and deputy general counsel, said in a statement.

Vonage Future

The first ruling had created major questions for Vonage's future, VoIP analysts said.

It just keeps getting worse and worse for them every week," said Will Stofega, research manager for VoIP services at IDC. "For the judge to rule they can't sign up new customers, that's the whole idea in terms of their strategy."

Vonage has said it has an alternative technology it can use that doesn't use the patents claimed by Verizon. "Now is the time to demonstrate they have it," Stofega said.

With no ability to grow, Vonage's future is in doubt, added Jeff Kagan, an independent telecom analyst. "Vonage was the poster child for the new VoIP technology, but now everyone is a competitor and their importance is limited," he said. "The big question is about the company's survival, not the VoIP technology."