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Vonage Gets Stay, Has No Workaround Vonage Gets Stay, Has No Workaround
By Jennifer LeClaire
April 25, 2007 8:30AM

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While Vonage has been granted a stay against the injunction barring the VoIP provider from signing new customers, Vonage admitted in a court filing that it has no VoIP workarounds that might make the need for a stay moot. Vonage had initially assured customers that it had a VoIP workaround and that there would be no interruption of service.
 



Vonage is breathing a sigh of relief this week as courts gave it permission to continue business as usual despite Verizon's victory in a recently decided patent suit.

On Tuesday, the U.S. Court of Appeals for the Federal Circuit in Washington D.C. issued a permanent stay of a previous court's injunction that would have barred Vonage from signing up new customers.

A jury found that the VoIP company trespassed on three of Verizon patents and must pay $58 million plus possible future royalties to its competitor. Vonage is appealing the verdict, but Verizon filed an injunction to prevent the VoIP company from using its patented technology after the jury decided in its favor.

No Interruptions?

Vonage anticipated Verizon's move and was prepared to seek the stay following an April 6 decision by the U.S. District Court in Alexandria, Virginia, enjoining the company from using certain VoIP technology to add new customers. The permanent stay enables Vonage to add new customers as it pursues an appeal.

"It's business as usual for us," Jeffrey Citron, Vonage chairman and interim chief executive officer, said in a statement, noting that the company remains focused on growing and strengthening its business and driving toward profitability. Citron maintains that Vonage has not infringed on Verizon's technology and remains optimistic that the company ultimately will prevail in the litigation.

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

Readying for Appeal

The U.S. Court of Appeals for the Federal Circuit in Washington D.C. specializes in patent law and has ordered a speedy hearing. Oral arguments are set for June 25. Vonage executives said they are confident in the strength of the company's appeal and the appeals court's intellectual property expertise.

Sharon O'Leary, Vonage's executive vice president, chief legal officer, and secretary, said the company believes the patents in this case were defined in an overly broad and legally unprecedented way. "We believe 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 well beyond what was intended by the patent trademark process."

Although O'Leary said she is confident that the "error will be rectified," the company nonetheless warned in a regulatory filing that its intellectual property war with Verizon could bankrupt Vonage. (continued...)

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