Vonage admits it has no work-around

It's not even sure whether one is feasible

Vonage Holdings Corp. has acknowledged that it has no work-around for technology that was found to infringe Verizon Communications Inc. patents and said that it doesn't know if one is feasible.

The disclosure came Friday when the voice-over-IP (VoIP) service provider made public additional information from an April 6 filing to the U.S. Court of Appeals for the Federal Circuit. The filing requests a permanent stay on an injunction issued March 23 in the U.S. District Court for the Eastern District of Virginia that would prevent Vonage from signing up new customers. The appeals court granted Vonage a temporary stay the same day.

Vonage has said it was developing work-arounds, or other ways of accomplishing the same tasks, to steer clear of the technology that it has been found to be infringing. The company is still working on those techniques, spokeswoman Brooke Schulz said today.

But in a section of the April 6 filing just made public at the court's request, the company confirmed that it has no such technique.

"While Vonage has been considering design around options, it does not have a design that can be implemented immediately, if such a design around is even feasible," the filing said. "In fact, current design around options contemplated could take many months."

In the filing, Vonage argued that a permanent injunction would cause irreparable harm to its business. With some words still concealed because of a protective order, parts of the filing have an ominous tone.

"Even if Vonage was somehow able to implement a design around, and was able to ultimately prevail on appeal, it would have no hope of regaining its lost customers, or its lost goodwill, and its loss of revenue would be permanent and [redacted]," the filing said. "In brief, the injunction would [redacted] Vonage before it even has the opportunity to challenge the injunction and underlying trial on appeal."

The upstart phone company's court loss to Verizon on March 8 has led to some grim assessments of its prospects by industry observers. Vonage has built its business on capturing new customers through expensive marketing campaigns and has not made a profit since it went public last May. It faces much larger rivals in the burgeoning VoIP industry, including cable operators.

Last week, CEO Michael Snyder left the company, and founder and Chairman Jeffrey Citron became interim CEO.

Vonage argues that the district court found it infringing the Verizon patents only because it defined the scope of those patents too broadly, Schulz said. The VoIP company wants a permanent stay on the injunction against signing up new customers that would last until the appeal is finished, which could be years, she said. Existing customers won't be affected by the case anyway until the appeals process is finished, according to Schulz.

In afternoon trading on the New York Stock Exchange, Vonage shares were down 9 cents, at $3.30. 

Copyright © 2007 IDG Communications, Inc.

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