Vonage Holdings Corp. must pay $58 million plus monthly royalties to Verizon Communications Inc. for infringing three patents on Internet-telephone service, a federal jury ruled.
Vonage shares fell to a record low.
Verizon asked for a court order banning Vonage’s use of the technology following today’s verdict in Alexandria, Virginia. The order would cripple Vonage by allowing it to handle only calls between the company’s customers, Verizon lawyer Peter McCabe said.
A hearing was set for March 23.
“This is a big negative surprise” for Vonage, said Clayton Moran, an analyst with Stanford Group in Boca Raton, Florida, who rates the shares “hold” and doesn’t own them. “It makes it more difficult for an already challenged business to get to profitability.”
New York-based Verizon, the second-largest U.S. phone company, sued money-losing Vonage in June, claiming it copied voicemail and other services. Vonage has lured away more than 1 million Verizon customers, according to the lawsuit. Vonage’s sales more than doubled to $607.4 million last year, compared with Verizon’s $88.1 billion.
Shares of Vonage fell 21 cents, or 4.2 percent, to $4.84 in New York Stock Exchange composite trading, the lowest closing price since they were first sold to the public in May for $17 each.
Verizon rose 80 cents, or 2.2 percent, to $36.48, bringing the past year’s gain to 13 percent.
Vonage, based in Holmdel, New Jersey, said it will appeal today’s verdict and would ask for an immediate stay of any court order halting its use of the disputed technology.
“We expect that verdict to be reversed on appeal,” Vonage said in a statement. “In addition, we don’t believe there is any basis to support Verizon’s request for an injunction.”
Vonage had accused Verizon of trying to stifle competition with the patent-infringement suit, one of at least two against the biggest independent Internet-phone company. Sprint Nextel Corp. is also seeking cash compensation and a court order to stop Vonage from using disputed technology.
During the two-week trial, Verizon said it was owed $197 million in damages for infringement of five patents. Vonage argued that if the patents were infringed, it owed no more than $69 million.
Vonage reported last month that its 2006 net loss widened to $286 million from $261 million a year earlier.
The jury of four men and four women found that three of the five patents were infringed and all of them are valid. The royalties set by the jury are 5.5 percent for each Vonage customer line per month. Vonage said it has 2.2 million subscriber lines.
“This is a significant victory for Verizon,” Verizon lawyer Daniel Webb said in an interview. “If a company’s infringing our patents, they can be held accountable.”
The infringed patents cover technology that translates calls between an Internet network and the standard telephone network, call-waiting features and wireless fidelity, or Wi-Fi, handsets. Vonage was cleared of infringing two patents related to billing systems designed to prevent fraud.
