RealTime IT News

Court Raises Possible Vonage Injunction Relief

WASHINGTON - Verizon would suffer no lasting harm if an injunction facing Vonage is lifted in its patent infringement fight with Verizon, the upstart online telephony company today told the U.S. Court of Appeals for the Federal Circuit.

Vonage attorney Roger Wren said even if Vonage loses it appeal, the $58 million in damages and royalties of 5.5 percent per customer ordered by the district court more than compensates Verizon for Vonage's infringement.

"An injunction should not be considered," Wren said. "There is no irreparable harm here."

U.S. District Judge Claude Hilton originally issued a permanent injunction against Vonage from using the infringed Verizon technology. Hilton later amended the injunction to bar Vonage from signing up new customers as long as it infringes on the Verizon patents.

The U.S. Appeals Court granted Vonage an emergency stay of the injunction in return for an expedited appeals hearing, which was held Monday before an overflow crowd. The court is expected to rule on the appeal by the end of July.

"Can there be any middle ground?" Judge Timothy Dyk asked Verizon attorney Richard Taranto. "Shouldn't the district court allow for a workaround? Particularly here where you might put someone out of business?"

Taranto countered that at the district court trial, Vonage never mentioned the possibility of a workaround, only that, "If you issue an injunction, we're dead." Vonage has consistently denied it infringes on the Verizon patents.

In the hour-long hearing mostly devoted to the technical aspects of patent claims construction and jury instructions, Dyk's question was one of the few moments when the Verizon and Vonage attorneys clashed.

Rebecca Arbogast, an analyst with Stifel Nicolaus, issued an advisory after the oral arguments that said the lack of questions from the three-judge panel made it difficult to determine where the court might be headed. However, she gave Verizon a "slight edge that the [lower court] will be upheld."

"We do not believe the court will overturn the injunction, as Vonage seeks, or delay its issuance for a particular period of time to allow Vonage to develop a workaround, as Judge Dyk suggested," Arbogast wrote.

She added the appeals court, if it rules in Verizon's favor, might grant Vonage a stay while the company seeks to have the Supreme Court review the case. In the alternative, she suggested, the court might send the case back to the district court to reconsider the injunction in light of the May eBay v. MercExchange decision.

In that case, the Supreme Court ruled both a district court and a federal appeals court erred when ordering a permanent injunction after a jury determined eBay  infringed on MercExchange's patents. The justices ruled an automatic injunction is not required in infringement cases and ordered the case back to a lower court to determine if a permanent injunction is justified. The case is still pending.

The Verizon patents, filed in 1997, cover the translation of domain names and IP addresses to telephone numbers when Internet calls are passed off to the traditional telephone system. Since a Voice over IP (VoIP) call is nothing more than another packet on the Internet, VoIP providers must translate an IP address into a telephone number recognized by the PSTN  for the call to connect.

Vonage claims the solution was obvious to those skilled in the art and the U.S. Patent and Trademark Office should have never issued the patents to Verizon. Vonage found added hope for its appeal after an April Supreme Court decision in KSR v. Teleflex involving the obviousness of inventions.

But Monday, the appeals court did not ask any questions about obviousness. Arbogast said the lack of questions confirms her view that the "court will not likely grant a new trial as Vonage requested."