Vonage Appeal Set By Court For April 24

Internet telephony provider faces cutoff of new customers without a stay from U.S. Court of Appeals.

By Roy Mark | Posted Apr 10, 2007
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A U.S. federal appeals court today set a hearing date of April 24 for Vonage's appeal of a pending injunction barring the Internet telephony company from signing up new customers. Vonage contends the injunction would amount to a "bullet to the head" for the struggling VoIP provider.

The injunction would be effective while Vonage appeals a lower court patent infringement decision won by Verizon. The infringed technology allows Vonage to connect its Voice over IP (VoIP)  calls to the telephone network.

After a jury awarded Verizon $58 million in damages (and a 5.5 percent per customer royalty going forward), U.S. District Judge Claude Hilton ordered the injunction. The U.S. Court of Appeals for the District of Columbia temporarily stayed the injunction last Friday.

Verizon had sought an injunction that would have stopped Vonage from using the technology to not only solicit new business but also bar it from servicing the company's existing customers.

Instead of imposing the full injunction sought by Verizon, Hilton decided to allow Vonage to continue servicing its existing customer base. "[The injunction] effects only new customers and allows Vonage to operate with its current customer base," he said. "It keeps [Vonage] from taking more clients from Verizon."

Vonage is also required to post a $66 million appeals bond. Verizon is also seeking an additional $168 million bond protecting its interests while Vonage uses the infringed technology during the appeals process. Hilton is expected to rule Thursday on the bond motion.

Verizon claims the Holmdel, N.J.-based 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 claims 2.2 million customers, admitted in court Friday it loses 650,000 customers a year.

Vonage said Monday it will continue to provide service to existing customers indefinitely by paying into escrow a quarterly royalty of 5.5 percent throughout the appeals process.

Vonage and Verizon could settle before the April 24 court date, but Vonage has vowed to fight the verdict, saying it is "confident" the appeals court will overturn the jury decision.

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