Vonage Wins Stay, Can Continue New Business

Apr 24, 2007 (12:04 PM EDT)

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Vonage, a voice over IP provider facing a patent infringement lawsuit from Verizon Communications, on Tuesday got a permanent stay of a previous injunction, which means it can continue to conduct business as usual and it can continue adding customers.

The U.S. Court of Appeals for the Federal Circuit in Washington, D.C., granted Vonage a permanent stay, which overturns an earlier decision by a federal judge that prohibited Vonage from signing up new customers while it was involved in a patent litigation with Verizon. The judge previously said Vonage could only continue serving existing customers.

Verizon last month won a jury verdict that banned Vonage from using technology that infringed on Verizon's patents. The telecom carrier also was awarded $58 million in damages.

Vonage believes it hasn't infringed on any of Verizon's technologies, which it hopes will ultimately prove true, said Jeffrey Citron, the company's chairman and interim CEO, in a statement. Citron was appointed as an interim CEO of Vonage this month, after CEO Michael Snyder stepped down.

Vonage said it will continue to serve existing customers and pay a quarterly royalty of 5.5% during the appeals process. It also will post a $66 million bond as required by the court.

But Tuesday's decision doesn't mean that Vonage's legal battle is over. Earlier this month, the company said it cannot assure customers that a "workaround" could be produced and developing one would likely take several months. While Vonage is again able to sign up new customers, many are likely to choose a different provider because of uncertainty around future services.