Vonage Settles With Verizon, Will Pay At Least $80 Million

by Scott M. Fulton, III

October 25, 2007, 7:18 PM

The cost of Vonage's VoIP technology development policy - build now, ask questions later - hardened a bit more after the close of stock trading this afternoon. Vonage has agreed to settle with the first of its three aggrieved parties, Verizon, in an unusual deal that hinges upon a forthcoming ruling from an appeals court and a separate injunction ruling from a district court.

Earlier this month, Vonage filed a motion with the DC Court of Appeals for a rehearing en banc (all three judges in session) of an earlier appeal of that court's Verizon decision, which Vonage had lost. That rehearing is a long shot (even more so now), so if the Appeals Court decides to deny Vonage's motion, it has agreed to pay Verizon $117.5 million. This after a jury had already awarded Verizon $58 million in damages, in a ruling which was partially remanded last month.

But if both dice come up box-cars, as it were, Vonage will go forward with its rehearing plans, while paying Verizon $80 million. A pending injunction against the sale of Vonage services remains stayed by a district court, but if that stay is lifted, Vonage will pay Verizon only the $80 million.

So far, Vonage has not said what it would be getting for its payout, and Verizon has yet to issue any formal statement as of 7:10 pm ET Thursday. It only appears as though the payment would settle the dispute, since no statement has been made as to whether Verizon is licensing Vonage any of its intellectual property in the VoIP field. Vonage had stated in the past that it is implementing workarounds, and it may be assumed Vonage will continue to do so, thus not infringing upon Verizon's IP in the future.

Two weeks ago, Vonage settled with Sprint for $80 million, in a deal which granted Vonage perpetual access to Sprint's Voice-Over-Packet portfolio.

Now only AT&T remains, having filed suit against Vonage just last week. It would appear at this point that $80 million is the going rate. In a late press release this evening, Vonage added it was already prepared to pay Verizon most of the $80 million fee, and that the additional settlement cost would impact it further by only $32 million.