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Vonage loses patent infringement case

by on26 September 2007


Ordered to pay Sprint Nextel $69.5 million


A jury in a patent infringement trial brought by Sprint Nextel Corporation against Vonage Holdings Corporation has delivered its verdict: Vonage infringed six patents owned by Sprint Nextel, and Vonage must pay $69.5 million in damages to Sprint Nextel as a result. 

Vonage is a provider of Voice over Internet Protocol (VoIP) telephone services to consumers and was an early champion of using VoIP to offer consumers savings on their telephone bills. Sprint sued Vonage in 2005, claiming that Vonage had violated seven of its telecommunications technology patents based on 61 patent infringement claims.

In addition to the ruling in Sprint Nextel’s favor and the damages awarded, the jury also ordered Vonage to pay Sprint Nextel a 5% royalty rate on Vonage future revenue.  Some analysts predicted that Sprint Nextel might also seek an injunction against Vonage to stop any ongoing infringement of Sprint Nextel patents.

The news caused Vonage stock to fall 34%, even after Vonage announced that it would appeal the decision.  Things have not been rosy for Vonage since it went public in 2006.  Vonage shares have fallen 92% since its IPO price of US$17.  Vonage also lost another patent infringement case to Verizon Communications, Inc. earlier in 2007 for infringement of 3 Verizon patents and was ordered to pay Verizon $58 million in damages plus 5.5% in royalties on Vonage future revenue; Vonage has already filed an appeal in the Verizon ruling.

Vonage issued a statement that the damages awarded in the Sprint Nextel case were unwarranted, but did indicate that it would try to modify its technology so that it was not infringing on any Sprint Nextel patents.

Last modified on 26 September 2007
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