Vonage and Verizon settle patent spat

Internet phone company, Vonage said it has resolved an ongoing patent dispute with Verizon Communications at a price tag of up to $120m.

The announcement comes a month after Vonage, which has yet to turn a profit, lost the bulk of an appeal regarding three VoIP patents held by the US' second-largest telephone company.

The appeals court supported a jury finding that Vonage had infringed on two patents arguably central to its service. It ordered a new trial on a patent infringement finding, dealing with a less significant feature to Vonage's service but the settlement also covers that patent, so court action is unlikely to proceed.

Because the jury did not distinguish which damages applied to which patents, the court also threw out a $58m judgment against Vonage.

The precise amount of Vonage's final payout to Verizon depends on whether the appeals court grants the rehearing Vonage has requested, Vonage said in a statement.

If Vonage wins a rehearing, or manages to secure relief from an injunction affecting one or both of the patents, it has agreed to pay Verizon $80m. If Vonage isn't granted a rehearing or if the injunction, which is currently on hold, is reinstated, Vonage said it will pay $120m - $2.5m of which will be "payable to certain charities". Vonage said it has already deposited $88m into an escrow account.

Sharon O'Leary, Vonage's chief legal officer, said in a statement: "We're pleased to put this dispute behind us and believe this settlement is in the best interests of Vonage and its customers."

Vonage has claimed all along that it has a technical workaround that will allow its service to continue working without disruption to its customers, even if a court ultimately decides to enforce an injunction stopping it from using Verizon's patents.

In addition to the Verizon deal, Vonage has now settled patent disputes in recent weeks with telecommunications company Sprint Nextel for $80m and Klausner Technologies, a privately held company that specialises in voice-messaging technology, for an undisclosed amount.

But it doesn't end there. Vonage revealed in a federal regulatory filing last week that it's facing a new patent infringement suit from AT&T in Wisconsin federal court.

Anne Broache writes for CNET News.com.