Vonage Gets Partial Remand in Verizon Case

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Vonage Holdings Corp. is downplaying an appeals court decision affirming an earlier verdict of patent infringement on two patents owned by Verizon Communications Inc.

The decision, made Wednesday, calls for the U.S. District Court in Virginia to retry the infringement judgment on a third patent. It also vacated the original US$58 million in damages and 5.5 percent royalty imposed in the original judgment.

The lower court will reconsider the size of the damage award and Vonage expects it to be reduced, said Charlie Sahner, a Vonage spokesman. In addition, Vonage expects a return soon of part of the cash it put up as bond after the ruling was made, he said.

The decision comes a day after Vonage lost another high profile patent infringement case brought by Sprint-Nextel Corp. The jury in that case awarded Sprint $69.5 million in damages. Vonage vowed to appeal that decision too.

Vonage has already deployed technology so that it doesn't require the two patents upheld in the Verizon case, it said. That means that if the lower court upholds the decision to require Vonage to pay royalties for using the patents, the company will only have to do so related to the period of time before the workaround was implemented, Sahner said.

The company maintains that it did not infringe on the remaining Verizon patent in question and plans to defend itself against any new damages judgments. That technology applies to less than 10 percent of Vonage's network and the company has already completed development of a workaround should the court decide that Vonage infringes on the patent, Sahner said.

Vonage is the largest independent voice over IP provider in the U.S. While it continues to assure customers that the service remains reliable throughout the legal wranglings, the company has seen a decline in new customers. In its second quarter this year, Vonage added 57,000 customer lines, compared with 256,000 in the same quarter in the previous year.

Still, Sahner emphasized that the future is bright for Vonage. The company has the cash to pay for the Sprint case, if it fails in appeal, Sahner said. "Vonage is here to stay," he said. "We want to be an alternative to the entrenched phone company and think it's important to have an alternative."

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