Vonage to Fight Verizon Patent Injunction; Long Battle Ahead

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Vonage to Fight Verizon Patent Injunction; Long Battle Ahead

6:00 am on March 26, 2007 | Category: Business, VoIP, Telecom Services, Telephone, Law, Editorials

A California judge issued a permanent injunction against Vonage’s use of certain VoIP and Wi-Fi technology on Friday, after New York-based telephone giant, Verizon Communications, won a patent infringement lawsuit against the broadband phone startup earlier this month.

This decision is a big win for Verizon, which won $58 million plus royalties in the original jury trial, and is doing its best to throw road blocks in the way of Vonage’s further expansion.

Vonage has been competing in the U.S. home phone market for several years now, targeting fixed-line customers with its low-cost VoIP offering and contributing to the ongoing erosion in demand for traditional local and long distance telephone services.

Verizon’s court victory puts a huge new financial burden on Vonage, which has spent heavily on marketing over the past couple of years, and has yet to turn a quarterly profit. The recent injunction ruling is being seen by many analysts as yet another nail in the young company’s coffin, reducing its technology portfolio, and thus its long-term market potential.

Vonage executives are vowing to appeal the case, however, and still have several legal options at their disposal to put a stay on the injunction.

“We remain confident that Vonage has not infringed on any of Verizon’s patents - a position we will continue vigorously contending in federal appeals court - and that Vonage will ultimately prevail in this case,” CEO Mike Snyder insisted in a statement.

Representatives of Vonage were also quick to say that even in the event of a court-imposed injunction, the company’s broadband telephone services would remain operational.

Vonage might not be dead in the water quite yet, but it’s hard to deny that they are in a very precarious position legally and financially, with VG share prices hitting new lows at the end of last week. Getting out of this mess, not to mention achieving profitability, will be a difficult uphill battle for the company, which could very well resound to affect the entire American VoIP industry.