Vonage infringed on Verizon patents

ALEXANDRIA, Va. — Internet phone company Vonage infringed on three patents held by Verizon Communications and must pay $58 million plus possible future royalties to its competitor, a jury said Thursday.

The judgment by the eight-person jury is far less than the $197 million Verizon had requested and was even slightly less than what Vonage had suggested would be fair if it were found liable.

Still undetermined is whether Vonage, based in Holmden, N.J., will be barred from using Verizon's technology or how the verdict might affect the Internet phone company's 2.2 million subscribers.

Following the decision, attorneys for New York-based Verizon requested a permanent injunction barring Vonage from further use of the patented technology. A hearing on the request was scheduled for March 23 in U.S. District Court in Alexandria.

Verizon sued Vonage last year for infringing on five patents that it said makes the Internet telephone service network functional. The jury found Vonage infringed on three of them — including one for linking Internet calls to the traditional phone network and another for features like call waiting.

Verizon said during the trial that most of the patents were integral to Vonage's technology that allows customers to place phone calls over the Internet. Vonage disputes that characterization.

Vonage said it will appeal the verdict and assured its customers that service will not be affected.

"If the trial court does impose an injunction, we will seek an immediate stay from the federal court of appeals," the company said in a statement.

If Vonage is hit with an injunction and cannot develop a workaround, the company will have to remove that part of the service, said John Rabena, a partner at the law firm Sughrue Mion PLLC. That would mean that Vonage customers would only be able to talk to other Internet telephone customers unless Vonage won on appeal or negotiated a license from Verizon.

Rabena said injunctions have become harder to obtain in the aftermath of last year's Supreme Court ruling in a suit against eBay Inc. that a finding of infringement did not automatically entitle a patent holder to an injunction.

In that case, the justices unanimously ruled that judges have flexibility in deciding whether to issue court orders barring continued use of a technology after juries find a patent violation. The decision threw out a ruling by a federal appeals court that said injunctions should be automatic unless exceptional circumstances applied.

Since that ruling, Rabena said companies are more likely to obtain an injunction when they are in direct competition with the infringer. That should help Verizon, which competes with Vonage, he said.

The jury found in its verdict that Vonage's infringement was not willful. That means Verizon cannot collect triple damages, which can sometimes be awarded in patent infringement cases.

Verizon claimed during the trial that it has lost 600,000 customers to Vonage as a result of the pilfered patents.

Vonage "has done very well with our patents and our technology for a number of years," Verizon lawyer Dan Webb said in closing arguments Wednesday.

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Contributing: Bruce Meyerson