Ruling: Vonage Can Still Woo

WASHINGTON — Vonage CEO Jeffrey Citron declared today it was business as usual for the Voice over IP  provider after a federal appeals court permanently stayed an injunction barring Vonage from signing up new customers.

The decision by the U.S. Court of Appeals for the Federal Circuit represents a significant legal victory for the Holmdel, N.J.-based Vonage  , which argued that, without the stay, it would face bankruptcy. The stay allows Vonage  to pursue its appeal of a patent-infringement decision against the company won by Verizon.

“We continue to believe we have not infringed on any of Verizon’s technology and remain optimistic that we will ultimately prevail in this litigation,” Citron said in a statement. “We thank the appellate court for its thoughtful consideration of the merits of our case.”

U.S. District Judge Claude Hilton issued the injunction on April 4 after a jury awarded Verizon $58 million in infringement damages. Hilton also ordered Vonage to post a $66 million appeals bond and directed the company to pay Verizon a 5.5 percent royalty rate for using Verizon’s technology to service existing Vonage customers.

Hilton, though, stayed the decision until the Court of Appeals could hear the injunction stay request. Tuesday’s decision means Vonage will now pay Verizon the 5.5 percent royalty rate for all customers using the infringed technology while the case on appeal.

The appeals court set May 9 for Vonage’s appellate brief with Verizon’s reply due by May 23. Vonage has until May 30 to replay.

“The court of appeals set a very short schedule for hearing Vonage’s appeal,” John Thorne, Verizon’s senior vice president and general counsel, said in a statement. “The expedited schedule will accomplish the same thing as a partial stay…limiting Vonage’s infringement during the appeal.”

Thorne added that a normal appeals schedule would take a year or longer. “Now it will be argued in just two months,” he said. “We expect the unanimous jury verdict will be upheld.”

At Tuesday’s stay hearing, Vonage attorney Roger Warren told the three-judge panel the injunction ordered by Hilton would threaten the continued viability of Vonage. He pointed out to the lower court testimony by Verizon that 75 percent of Vonage’s customers came from carriers other than Verizon.

“The injunction here is against new customers,” Warren said. In balancing the harm to the two companies, Warren urged the court to consider the “real risk of insolvency by Vonage. On the other side, Verizon might lose some customers but it gets a royalty rate.”

Verizon attorney Richard G. Taratano said Vonage’s stay request was based on “hedged and qualified statements” and that Vonage hadn’t presented “any case for irreparable harm.”

Verizon claims Vonage has taken away more than a million customers from the nation’s second-largest telecom, which also operates it own VoIP service. Vonage, which has 2.2 million customers, admits it loses more than 600,000 customers a year and, without the ability to recruit new customers, bankruptcy would loom for the company.

The technology in question allows Vonage to connect its VoIP calls to the public telephone system.

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