On Thursday, a federal jury ruled that Vonage violated patents owned by Verizon, and ordered the VoIP (voice over Internet phone) company to pay the wireless carrier $58 million in damages. They have also been ordered to pay large royalty fees in the amount of 5.5% for every Vonage customer.
Vonage, whose service allows Internet users to use their Internet connection to make and receive phone calls, both to other Vonage users and to standard telephone customers, had been sued by Verizon for more than $200 million in damages. In an odd twist, the $58 million in damages Verizon was granted was actually less than Vonage had suggested might be a fair penalty, should it be found guilty.
After hearing the ruling, Verizon stated it will ask for a permanent injunction to keep Vonage from continuing to use the patented technology. Vonage countered that if such an injunction is granted, it will seek an immediate stay from the federal Court of Appeals.
Verizon seemed happy with the ruling. “Patents encourage and protect innovations that benefit consumers, create jobs, and keep the economy growing,” said Verizon’s lawyer, John Thorne. “Verizon’s innovations are central to its strategy of building the best communications networks in the world.”
The jury found that Vonage violated one patent related to connecting a standard phone call to an Internet phone call, as well as two other patents related to billing customers. At the trial, Vonage claimed that Verizon – which does have a VoIP plan, although very lightly marketed or used – was simply trying to squash a competitor. It also claimed that Verizon’s patents were illegal, and should never been granted to begin with. They made the argument that Verizon’s patents were tantamount so someone attempting to assemble a fir tree, electrical cord and lights and patenting the Christmas tree.
The ruling obviously is cause for concern for Vonage. Although the company has said it has a backup plan, the big challenge they now face is how to come up with the money. Vonage, which gets an average of $25 to $30 per customer, has never made money as a business. During the last year alone, Vonage lost close to $300 million on revenue of $607 million.
Vonage has denied any wrongdoing, and assured its customers that their service would continue uninterrupted. Unless, of course, the injunction is granted and a stay denied, in which case Vonage customers would lose their ability to talk to users not connected to Vonage’s service.