Judge Issues Injunction to Bar Vonage From Signing New Customers Using Verizon Patents

Apr 06, 01:30 PM

Current Headlines: By Matthew Barakat Associated Press

ALEXANDRIA, Va. -- A judge issued an injunction Friday that would bar Internet phone carrier Vonage from signing up new customers as punishment for infringing on patents held by Verizon Communications Inc.

Vonage Holdings Corp. planned an immediate appeal.

The company's lawyers argued that the compromise injunction issued by U.S. District Court Judge Claude Hilton would be almost as devastating as ordering Vonage to cut off service to its 2.2 million existing customers.

"It's the difference of cutting off oxygen as opposed to the bullet in the head," Vonage lawyer Roger Warin said.

The judge had initially planned to issue a full injunction that would have barred Vonage from using the patented technology to serve its existing customers.

Verizon's lawyers proposed the compromise injunction earlier this week as a way to avoid shutting down Vonage's entire network.

Last month, a jury in Alexandria, Va., found that Vonage infringed on three patents held by Verizon. The jury awarded Verizon $58 million plus future royalties of 5.5 percent on revenue obtained through continued use of the infringed patents.

On March 23, Hilton went even further, issuing a permanent injunction barring Vonage from further use of the patented technology. But he delayed putting it into effect until Friday's hearing, at which he replaced it with the compromise suggested by Verizon.

Hilton said he would wait until Thursday to impose the new injunction, giving Vonage time to appeal.

The judge has said that awarding royalties to Verizon was insufficient, given a competitive climate in which Vonage continues to gain subscribers at Verizon's expense.

In court papers filed Wednesday, Verizon said that if a full injunction were to be implemented, it "would cause virtually all of (Vonage's) customers to leave for another provider."

Vonage officials have said that Verizon overstates the patents' importance and that they have a strong likelihood of getting the verdict overturned.

Rebecca Arbogast, an industry analyst with Stifel Nicolaus, said Verizon's compromise would be nearly as effective as a full injunction while being more likely to hold up on appeal.

"I think Verizon's legal strategy has been very aggressive and very effective," she said. "Vonage doesn't have very many attractive options except to hope for an emergency stay."

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