Vonage Holdings Corp has been blocked from offering its core VoIP services, after a US court found that it infringed patents owned by rival Verizon.
The company’s share price took a 26% dive on the news, settling at an even $3 on Friday. Vonage stock is now down 83% from its May 2006 IPO price of $17.25.
The ruling, enjoining Vonage from using technology covered in three Verizon patents, would mean the company would have to shut off its service or figure out a workaround.
But it is not immediately effective. Vonage has asked for a stay, a request that will be heard in two weeks, according to the company. It also expects to appeal the infringement ruling, and said it is confident its customers will see no change in their phone service.
Our fight is far from over, Vonage chief executive Mike Snyder said. We remain confident that Vonage has not infringed on any of Verizon’s patents — a position we will continue vigorously contending in federal appeals court — and that Vonage will ultimately prevail in this case.
Two weeks ago, the Virginia District Court ruled that Vonage had infringed Verizon’s VoIP patents, and ordered the company to make a $58m damages payment. It also imposed a 5.5% ongoing royalty fee.
The company denies that it copied Verizon’s patented technology. Vonage relied on open-standard, off-the-shelf technology when developing its service, said Sharon O’Leary, Vonage’s executive vice president and chief legal officer.
In fact, evidence introduced in court failed to prove that Vonage relied on Verizon’s VoIP technology, and instead showed that in 2003 Verizon began exploring ways to copy Vonage’s technology, she added.
The court ruled against Vonage, anyway, and it will be in the company’s best interests to resolve the matter as quickly as possible. Even if existing customers do not see service interruptions, Vonage’s current strategy is to add customers as quickly as possible, and the mere potential for disruption will not help the company toward that goal.