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

“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

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

“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.

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.”

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