Vonage wins stay of patent ruling
A federal appeals court Tuesday allowed Vonage Holdings Corp. to continue to sign up new customers while it tried to overturn a lower court decision that it violated patents held by Verizon Communications Inc.
The U.S. Federal Circuit Court of Appeals in Washington issued a full stay of a District Court order that prevented Vonage from using the patented technologies to attract new customers but allowed it to keep serving its 2.4 million subscribers.
New customers are the company’s lifeblood, needed to make up for those who quit the service every month, said Scott Doyle, a Vonage lawyer.
The news was some relief to Wall Street. Vonage shares rose 83 cents to close at $3.72 after falling to their lowest level, $2.83, in the hours before the ruling. Holmdel, N.J.-based Vonage went public in May at $17 a share.
Vonage Chairman Jeffrey A. Citron said the company “will ultimately prevail” because it believed it did not infringe three patents held by Verizon. Vonage is attacking the expansive interpretation of the patents by U.S. District Judge Claude Hilton in Alexandria, Va.
On March 8, the jury in that trial found that Vonage violated Verizon patents, including ones covering key technologies that connect Internet calls to the public phone system and provide features such as call forwarding and voicemail.
The patents were “defined in an overly broad and legally unprecedented way” that “artificially expanded the coverage of Verizon’s patents well beyond what was intended by the patent trademark process,” Vonage Chief Legal Officer Sharon O’Leary said.
Analysts say Vonage’s best shot at saving its business is getting Hilton’s rulings overturned.
Vonage’s temporary victory didn’t faze Verizon because the three-judge appellate panel set up a short schedule for filing legal briefs and a June 25 hearing for oral arguments. A decision could come as early as July.
“The expedited schedule will accomplish the same thing” that the lower court order would have done with a normal appeals process that lasts a year or more, said John Thorne, Verizon’s deputy general counsel.
He said the nation’s second-largest phone company wanted to limit Vonage’s infringement during the appeal. He expects the appeals court to uphold the jury verdict.
Appeals court judges questioned lawyers extensively in Tuesday’s two-hour hearing about the broad definitions Hilton had given the patents.
To get the full stay, Vonage had to show, among other factors, that it was likely to win on appeal and that it would suffer irreparable harm if the lower court order went into effect.
“Had the full stay not been granted, it would have been the end of the company,” said Carl Tobias, a University of Richmond law professor. “But now, Vonage will have to persuade potential customers that it will still be around after the appeals court decides the merits.”
