Judge orders an injunction against phone firm Vonage

ALEXANDRIA, Va. (AP) — A federal judge on Friday ordered a permanent injunction against Internet phone carrier Vonage for use of rival Verizon Communications Inc.'s patents.

But the injunction, which could potentially cause major disruptions to the service provided by Vonage to its 2 million customers, will not take effect for at least two weeks. U.S. District Judge Claude Hilton said he will wait two weeks to officially enter the injunction while he considers Vonage's request for an extended stay.

The injunction came after a jury verdict earlier this month that Vonage — a leader in the Internet phone marketplace known as Voice over Internet Protocol, or VoIP — infringed on three Verizon patents.

The jury awarded Verizon $58 million plus 5.5 percent of Vonage's future revenue garnered from continued infringement of the patents, but Hilton ruled that the additional measure of a permanent injunction was warranted.

Simply providing monetary damages "does not prevent continued erosion of the client base of the plaintiff," Hilton said in explaining his ruling.

Verizon lawyer Dan Webb argued that Verizon has already lost hundreds of thousands of customers to its competitor in a growing sector of the telecom industry.

Vonage officials have spent $425 million advertising their product "so they can lock up this emerging market and we can't get a toehold in it," Webb said.

The exact effect of an injunction on Vonage's service is difficult to determine. Vonage filed its arguments on the issue under seal. In a statement released Friday, Vonage Chief Executive Mike Snyder said, "We are confident Vonage customers will not experience service interruptions or other changes as a result of this litigation."

Even if Hilton refuses to stay the injunction, Vonage said it is confident it can obtain a stay from the federal appellate court.

The two sides differ on how extensively the infringed patents are integrated into Vonage's system. Verizon's lawyer said the infringed patents are "embedded into their infrastructure." He also said that Vonage warned of "enormous business difficulties" in its sealed pleadings if an injunction were enforced, including possible difficulties for customers to make 911 calls.

But Vonage, based in Holmdel, N.J., countered that Verizon overstates the importance of the disputed patents to Vonage.