Vonage: We Have Patent Workarounds

During its quarterly earnings call Thursday, Vonage chief executive Jeffrey Citron acknowledged that the company's patent fight against Verizon has hurt profit margins, but says it has developed workarounds for two of the three patents in question.

Vonage declined to offer specifics on how it intends to sidestep Verizon's VoIP patents if it loses on appeal, only saying a software update would be delivered to subscribers in the coming weeks. The third patent -- involving placing calls over Wi-Fi -- is still being worked on, but Vonage says only 10 percent of subscribers use Wi-Fi phones.

Vonage had asked a federal appeals court to vacate the March ruling against it and return the case to a lower court following the U.S. Supreme Court ruling that questioned the validity of "obvious" patents, but the request was denied earlier this month. In turn, Vonage must appeal the case beginning in June.

Vonage does, however, still plan to use the Supreme Court decision to defend itself against Sprint Nextel in a separate patent lawsuit that is expected to go to trial in the fall.

Verizon sued Vonage in June 2006, accusing the fledgling voice over IP firm of knowingly infringing on patents related to functionality such as call forwarding and fraud detection. A jury agreed with Verizon in early March, awarding the company damages of $58 million in addition to a 5.5 percent royalty on all future Vonage sales.

Not counting the royalty payments, Vonage said it had narrowed losses in its first fiscal quarter to $50 million, or 32 cents per share. During that time, Vonage also added 166,000 new customers, bringing its total customer base to 2.4 million.