Internet phone service Vonage said on Friday it agreed to settle a patent dispute with U.S. telephone giant AT&T that calls on Vonage to pay AT&T up to $7.8 million a year.
Vonage said in a statement the five-year settlement deal means it must make an upfront payment of $1.95 million to AT&T in January 2008 and then pay $650,000 per month over the life of the multi-year contract. The $1.95 million is prepayment on the last three months of the deal.
In addition, Vonage said AT&T had granted it non-exclusive rights to AT&T patents related to Voice over Internet Protocol (VoIP) and dual-mode wireless services.
The agreement does not grant Vonage any rights or license to operate a wireless network to provide any wireless service, it said.
Shares of Vonage closed off 7 cents or 3.4 percent at $2.00 on the New York Stock Exchange ahead of the announcement. In extended trading, the stock declined another 3 cents to $1.97.