Jury Rules Vonage Violated Sprint Patents

In another court defeat, a federal jury has found Vonage infringed on Sprint Nextel patents and should pay $69.5 million in damages plus a share of revenue.

In another court defeat for VoIP provider Vonage, a federal jury has found Vonage in violation of six patents held by Sprint Nextel, and ordered the company to pay $69.5 million in damages, along with a five percent royalty rate on Vonage’s future revenue.

Sprint sued Vonage for patent violations in 2005, originally claiming 61 violations of seven telecommunications patents. The decision comes in the wake of a damaging patent battle between Vonage and Verizon last March, in which Vonage was ordered to pay $58 million and cease infringing on Verizon’s technology. The proceedings in that case have repeatedly threatened to shut down Vonage’s operations as the company struggled to have the injunction postponed during its appeal process, and attempted to implement workarounds to Verizon’s patents. Vonage was able to retain the ability to sign up new customers and continue operations while its case with Verizon moves forward.

"We are extremely pleased with the verdict as it underscores the strength of our voice-over-packet portfolio and reinforces the importance of the innovations developed by our employees," said Harley Ball, Sprint’s VP of intellectual property, in a statement.

For its part, Vonage has already announced its intentions to appeal the decision: "We are disappointed that the jury did not recognize that our technology differs from that of Sprint’s patents," said Sharon O’Leary, Vonage’s chief legal officer, in a release. "Our top priority is to provide high-quality, reliable digital phone service to our customers. Vonage has already demonstrated that it can keep its focus on customers and on its core business while managing ongoing litigation."

Despite a high-flying IPO in mid-2006, Vonage has been losing money at a steady clip, with shares falling 92 percent from IPO levels as the company faces litigation and competition from cable operators and other VoIP operations (like Skype).

Under a recent Supreme Court ruling which revises legal thinking about the "obviousness" of patents which describe concepts without offering much in the way of innovation, Vonage may have a chance to beat the Verizon patent lawsuit, and the company will be allowed to argue the new standard should be applied in its case. As yet, it is too early to know whether Vonage’s appeal tactics with Sprint may follow a similar tack. The jury verdict has also rekindled speculation Sprint may be interested in acquiring Vonage.