Court Partially Affirms Vonage Verdict

By BARBARA ORTUTAY

NEW YORK – For the second time in two days, Internet phone company Vonage Holdings Corp. was hit with bad legal news Wednesday when a federal appeals court upheld a March jury verdict and injunction against it for patent infringement.

The company’s shares sank to 93 cents, their lowest level since Vonage went public in May 2006.

A Virginia jury awarded Verizon Communications Corp. $58 million in damages plus 5.5 percent royalties on future revenues after finding that Vonage violated three Verizon patents in building its Internet phone system.

On Tuesday, Vonage was ordered to pay Sprint Nextel $69.5 million in damages after a jury found that Vonage willfully infringed on six Sprint telecommunications patents.

Verizon spokesman Peter Thonis said Wednesday’s ruling "speaks for itself."

Though the U.S. Court of Appeals for the Fourth Circuit upheld the March verdict, it directed the trial court to reconsider the verdict on one of the three patents and it vacated the damages and royalty awards.

The awards were vacated because the lower court did not specify which portion of the damages was attributable to which patent, Blair Levin, an analyst with Stifel Nicolaus, said in a note to investors.

The appeals court found that the district court improperly construed part of the third patent, which involves wireless access to Voice over Internet Protocol (VoIP) service.

The injunction has been stayed pending resolution of Vonage’s appeal. Unless the company now obtains an emergency stay from the U.S. Supreme Court, the injunction will go into effect within a month, Levin said.

Vonage said it does not expect the decision to have an adverse effect on its business because it has deployed workarounds for the two patents in question for some time.

Verizon shares rose 37 cents to $44.44 Tuesday afternoon.