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Vonage Wins Reprieve

VoIP provider Vonage has won a permanent stay against an injunction which would have prevented the company from signing up new subscribers. The three judge panel heard 90 minutes of technical testimony from lawyers from both Vonage and Verizon, during which Vonage lawyer Roger Warin argued the judge in its patent infringement trial with Verizon had given the jury improper instructions on how to interpret key technical terminology, and misconstrued claims in three of the disputed patents.

The stay is a breath of fresh air for a company which has been battered with a near-continuous stream of bad news. First, in June 2006 Verizon sued Vonage for infringing on patents related to VoIP service and other phone technologies; in March of this year, a jury found Vonage guilty of infringing on three of the patents. Vonage vowed an appeal, but the trail judge barred Vonage from infringing on Verizon’s patents—which would effectively have shut down Vonage’s operations—but gave the company two weeks to convince him he was wrong. As an alternative to an out-and-out shutdown, Verizon proposed Vonage be barred from signing up new customers until the patent dispute is resolved. Now, Vonage has dodged that bullet: the permanent injunction means Vonage can continue with business as usual until the patent case is resolved.

Vonage remains bullish about its chances on appeal: “We believe the original verdict was based on an erroneous claim construction—meaning the patents in this case were defined in an overly broad and legally unprecedented way,” said Sharon O’Leary, Vonage’s executive vice president, chief legal officer and secretary, in a statement. “We believe the district court’s decisions repeatedly neglected well-established law on claim construction and, as a result, artificially expanded the coverage of Verizon’s patents well beyond what was intended by the patent trademark process.”

However, the company’s public optimism also comes with an admission it has no way to work around Verizon’s patents, despite a back-against-the-wall deal with VoIP, Inc.. In a court filing last week, Vonage admitted: “While Vonage has studied methods for designing around the patents, removal of the allegedly infringing technology, if even feasible, could take many months to fully study and implement.”

The company had initially assured customers and investors there would be no interruption in service even if Verizon’s injunction were upheld.

Arguments on Vonage’s appeal are set to get underway June 25; the case has been set on a fast schedule, which may lead to a quicker resolution. Patent battles are notorious for lasting years; lawyers for both sides are publicly optimistic this case might be settled within months. Verizon deputy counsel John Thorne praised the appeals court decision to expedite the case, noting that would at least limit the amount of time Vonage would continue to infringe on Verizon’s patents.

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