Vonage Wins Temporary Stay, Can Sign Customers

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6:45 pm CT April 6, 2007 - Late Friday, VoIP service provider Vonage announced with some relief that the US Court of Appeals for the Federal Circuit has issued a temporary stay of a judge’s order imposed earlier today. Were that order to take effect, then Vonage would be prohibited from signing on new customers beginning next Thursday.

The temporary stay gives Vonage time to assemble its plea for a permanent stay, but probably not much more time – maybe a matter of days.

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At the close of trading on the NYSE exchange Friday, Vonage stock value racked up another 6.9% to its loss of over 77% of its IPO value last May. Analysts tonight are saying today’s temporary stay may only provide Vonage with a tiny bit of breathing room to gather revenue – which it will need in the upcoming battle with Verizon – since customers are already wary of the fact that Vonage’s claim to its own technology has been successfully challenged.


11:45 am ET April 6, 2007 - A federal judge in Alexandria, Virginia has issued an injunction against Vonage that prevents the company from signing up any new customers. Vonage was found guilty of infringing on patents owned by Verizon earlier this month.

U.S. District Judge Claude Hilton did not grant Verizon what had initially asked for: a permanent injunction to bar Vonage from further use of the technologies. However, Vonage says that not being able to add new customers is just as dire for the Internet telephone company.

Verizon recommended the imposed injunction as a compromise to keep Vonage in business.

"It's the difference of cutting off oxygen as opposed to the bullet in the head," Vonage lawyer Roger Warin said after the decision.

Vonage vowed to appeal the ruling, but the company must lodge a $66 million appeal bond. Vonage was ordered to pay damages of $58 million to Verizon, in addition to a 5.5 percent royalty on all future Vonage sales.

Verizon sued Vonage in June 2006, accusing the fledgling voice over IP firm of knowingly infringing on seven patents related to functionality such as call forwarding and fraud detection. Vonage said it never knew of the patents and was not approach by Verizon until the lawsuit.

Although Vonage has remained adamant that it would remain in business despite the outcome of the case, analysts are beginning to question the viability of the company following Friday's ruling. Vonage has signed a license agreement with another Internet telephony company, VOIP, Inc., to utilize its network if Vonage must shut down its own, but the company has largely remained mum on its backup plans.

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