Vonage loses Sprint Nextel patent suit

IDG News Service - A federal court ruled yesterday that struggling voice-over-IP provider Vonage Holdings Corp. infringed on patents owned by Sprint Nextel Corp.

Jurors in the U.S. District Court in Kansas found that Vonage willfully infringed on Sprint's patents as part of its VoIP service, Vonage said. The jury awarded Sprint $69.5 million in damages, which amounts to 5% of Vonage's revenue during the infringing period.

Vonage plans to initially ask the court to set aside the verdict, but if that fails, the company will appeal the decision. In the meantime, Vonage will also develop work-arounds that don't require Sprint's patents, it said.

This is the second legal blow to Vonage this year. Earlier this year, a court found that Vonage infringed on Verizon Communications Inc. patents. That case came with an injunction that would have prevented Vonage from signing up new customers. Vonage won a stay of that injunction and is appealing the original infringement ruling.

Although it's clearly bad news for Vonage to have two patent infringement rulings against it, the appeals could change everything, said Seth Ostrow, a partner specializing in patents at Dreier LLP. "Often, there are mistakes made during various stages of a case that form the basis for a successful appeal, and that, coupled with the statistics, gives reason to think that Vonage has a significant chance of getting this changed," he said. Statistics show that patent cases often get changed on appeal, he said.

In August, Vonage said it had nearly completed rolling out work-arounds for two of the three patents claimed by Verizon. Still, the Verizon case alone appears to have slowed growth for the company, the largest independent VoIP provider. In its second quarter this year, Vonage added 57,000 customer lines, compared with 256,000 in the same quarter in the previous year.

Vonage has said that Verizon pursued the lawsuit in an effort to eliminate a competitor.