Vonage Loses Patent Case to Sprint, Injunction May Be Next

By Scott M. Fulton, III, BetaNews

September 25, 2007, 6:35 PM

In a blow to its fortunes that analysts feared could be fatal to the company, VoIP service provider Vonage was handed a defeat this afternoon by a federal jury in Kansas City, Kansas trying a patent infringement case brought against it by wireless carrier Sprint Nextel.

Vonage has been ordered to pay Sprint $69.5 million in damages plus 5% royalties on all future revenue, though the defeated company said this afternoon it will file an appeal. Today's decision comes six months after Vonage lost very a similar case to Verizon. There, the VoIP provider was ordered to pay Verizon $58 plus 5.5% in royalties on all future revenue.

Last April, analysts speculated that Vonage would be able to make good on its debt to Verizon by perhaps letting itself be acquired by Sprint. A simple Google search might have enlightened analysts as to the fact that Sprint's lawsuit was filed in October 2005.

Alluding to its previous experience with Verizon, Vonage chief legal officer Sharon O'Leary stated this afternoon, "We are disappointed that the jury did not recognize that our technology differs from that of Sprint's patents. 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." She promised her company is developing a workaround that would not infringe upon Sprint's patent portfolio, although the company was also said to be developing a similar workaround for Verizon's IP.

Sprint's attorney told Bloomberg News this afternoon that all he needs to do is make a quick conference with his client, before asking Judge John Lungstrom to impose an immediate injunction on the sale of Vonage products. Analysts warn such injunctions are often too forthcoming.

The news came too early for the closing bell on Wall Street, so analysts' views that this could be the end of the road for Vonage (unless it wishes to be acquired by someone else who happens to have sued it) sent its stock value tumbling by one-third in late trading, to a mere $1.30 per share.