Vonage buckles up for Verizon patent suit

A struggling Vonage goes to court this week to defend itself in a patent infringement case brought by Verizon Communications.

Verizon filed suit against Vonage in June claiming the company violated several of its patents. The suit focused on the technology Vonage uses to connect calls from its IP service to phones on the traditional network.

Vonage denies it has violated any patents. It claims most of the technology it uses is standards-based and widely available throughout the industry. For example, Vonage uses voice gateways from Cisco Systems to route voice traffic over the internet, connecting IP phone calls to the regular phone network.

Verizon has asked for monetary damages and an injunction. This means that if it wins, Vonage could be forced to shut down its service, unless it can develop a workaround that does not violate the patents.

A Vonage spokeswoman said it is highly unlikely that service would be interrupted for Vonage's roughly two million customers.

She said: "First of all, we don't think we have violated any of Verizon's patents. But if the court finds that we do, we will come up with a solution. And we won't have to shut off service to our customers."

The trial comes at a time when Vonage does not need any more distractions. Just last week, it announced during a profts conference call that it was losing momentum in the internet telephony market.

In the fourth quarter, Vonage added only 166,000 new subscribers for its voice over IP service. That was down from 204,591 subscribers in the third quarter, and from 256,000 in the second quarter of 2006. Despite its heavy marketing spend, many of Vonage's advertisements, designed to create more brand awareness, had been a flop, company executives have acknowledged. The company is now focusing on producing infomercials, which will highlight customer testimonials.

Vonage's slowing subscriber growth is in stark contrast to subscriber growth among cable operators, which have been setting records.

In an effort to diversify its business, Vonage has started to offer new services. It struck a deal earlier this year with EarthLink to resell wireless broadband in cities where the ISP is building citywide networks.

Executives also said Vonage will begin selling dual-mode handsets that will enable people to make VoIP calls alongside mobile phone calls. Some analysts speculate that Vonage is preparing to launch its own mobile virtual network.

Marguerite Reardon writes for CNET News.com