Vonage infringed Sprint patents, says jury

A US federal jury has found internet telephony player Vonage infringed on six patents held by Sprint Nextel.

The jury ordered Vonage to pay Sprint $69.5m in damages.

Sprint sued Vonage in 2005, claiming the company was infringing on seven Sprint patents that dealt with connecting internet phone calls. Vonage denied the claims and argued that Sprint's patents shouldn't have been approved in the first place.

Vonage said in a statement it will appeal the federal court's verdict. Vonage also said it will develop technological workarounds that don't infringe on Sprint's patents.

Sharon O'Leary, chief legal officer for Vonage, said in a statement: "We are disappointed that the jury did not recognise that our technology differs from that of Sprint's patents."

This is the latest in a series of legal setbacks the voice over IP provider has faced this year. In March, a jury in Virginia found Vonage had infringed on three patents held by Verizon Communications. And the court ordered Vonage to pay $58m in damages, plus 5.5 per cent in royalties on future revenue earned while it was infringing on the patents. Vonage is currently appealing the decision.

Vonage's stock price plunged more than 33 per cent after the verdict was released, and it closed at $1.30 per share. O'Leary attempted to temper customers' and investors' concerns that this latest legal decision would harm the company.

She said in the statement: "Our top priority is to provide high-quality, reliable digital phone service to our customers. Vonage has already demonstrated that it can keep its focus on customers and on its core business while managing ongoing litigation."

But in truth, Vonage has had a very hard time keeping its business going while it also fights its legal battles. In August, the company reported that subscriber growth had dropped significantly. In the second quarter of 2007, Vonage added only 57,000 new customers. This is down dramatically from the 166,000 new customers it added in the first quarter.

Vonage didn't just have trouble acquiring new customers, it also had trouble keeping them. During the second quarter its churn rate, or the rate at which customers cancel service, rose to 2.5 per cent from 2.4 per cent in the previous quarter.

Marguerite Reardon writes for CNET News.com