Verizon Sues Vonage in Patents Dispute

Discussion in 'VOIP' started by Jeremy, Jun 19, 2006.

  1. Jeremy

    Jeremy Guest

    Vonage, the Internet telephone startup, said today that it was being sued by
    Verizon Communications in a dispute over the underlying technology that
    allows voice calls to be delivered over the Internet.
    The lawsuit adds a new challenge for Vonage, which has seen its stock price
    slide precipitously since it went public last month.

    Vonage's shares, which were initially sold for $17, fell as low as $8.45
    this afternoon, more than 11 percent below Friday's close.

    In its latest challenge, Vonage is being accused by Verizon of violating "at
    least" seven patents, according to the complaint, which was filed June 12 in
    Federal District Court in the Eastern District of Virginia.

    Among its claims, Verizon alleged that Vonage was using some of its
    technology that enables voice calls to be transferred from the Internet onto
    the conventional telephone network.

    It is unclear whether the technology covered by those patents is being used
    in Verizon's consumer Internet phone service, called VoiceWing.

    Significantly, the lawsuit - as is sometimes the case in patent suits - does
    not ask the court to immediately stop Vonage's operations. But it does ask
    the court to do so if the matter is resolved in Verizon's favor. Lawyers
    said it could take more than a year for the case to work its way through the

    In a statement, Vonage said that it respected the valid intellectual
    property rights of others and that it believed its services were built on
    technology it developed itself or licensed from other companies.

    "Vonage intends to vigorously defend the lawsuit," the statement said.

    Brooke Schulz, a Vonage spokeswoman, declined further comment. Vonage
    officials have declined comment since the public offering, citing a quiet
    period mandated by the Securities and Exchange Commission, but that period
    expired today.

    The lawsuit compounds the challenges for Vonage, which, despite becoming the
    early leader in the Internet phone market and enjoying relatively strong
    name recognition, faces growing pressures from much larger competitors.

    In particular, cable companies like Time Warner and Comcast, and telephone
    companies like Verizon, are investing more heavily in developing and
    marketing service that delivers voice traffic over Internet lines.

    Telecommunications industry analysts have said the steep slide in Vonage's
    stock reflects not just rough market conditions but also a perception by
    investors that Vonage will be unable to fend off competition from larger
    companies with deeper pockets and longer-standing customer relationships.
    Jeremy, Jun 19, 2006
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