Vonage loses again, refuses to say “uncle”

After winning one just the other day, Vonage got beat down by Verizon in court again in the VoIP providers’ battle over alleged copyright infringement.

On Friday, the verdict the gavel came down on Verizon’s side one more time as a U.S. district court ordered a permanent injunction against poor ol’ Vonage for use of rival Verizon Communications Inc.’s patents.

This hearing was the legal offspring of an in-court tussle earlier this month in which judges ruled that Vonage Holdings is to pay $58 million plus 5.5 percent in royalties on future sales. Vonage had been suing for $197 million and a 19 percent in royalties.

However, Friday’s ruling carried an accompanying statement by U.S. district judge Claude Hilton explaining that “[Simply providing monetary damages] does not prevent continued erosion of the client base of the plaintiff.”

The injunction does not go into effect for at least two weeks, a time period in which Vonage will presumably be attempting to figure out a) how to avoid having to cut service to the two million-plus extant Vonage customers, b) more ways to appeal in court, thereby staying financial execution, or c) both of the above.

Watching Vonage spokespeople and PR on this thing has been an excellent study in spinning news events. In the last case, Vonage reported that the company was “delighted that the jury rejected Verizon’s meritless claim that we infringed their two billing patents. Of the seven patents Verizon originally sued on, (sic) they prevailed on only three and we expect that verdict to be reversed on appeal. The jury’s damage award represents a 70% reduction from Verizon’s $197 million claim. The jury also unanimously rejected Verizon’s claim that Vonage willfully infringed its patents.”

Of course, that time ‘round, Vonage also promised that “Vonage’s customers should see no change to any aspect of their phone service.”

Well, Vonage plucky planners, PR people and spin doctors are hard at work on this one. Vonage opened with the news that the Alexandria, Va. district court had released an order “enjoining Vonage from using certain VoIP technology,” that the order is not immediately effective, and that “Vonage is confident its customers will see no change in their phone service.”

(Note the grammar shift from “should” to “will” as the situation worsens…)

Explains Vonage of upcoming proceedings: “The court announced its intent to hear stay argument in two weeks’ time. At that time, the court intends to render a decision regarding the stay, as well as making the injunction effective. If the court denies the stay, Vonage will seek a stay through appeal from the Federal Court of Appeals. Vonage is confident it will be able to obtain a stay through appeal.”

Vonage CEO Mike Snyder stated that “Despite this obvious attempt by Verizon to cripple Vonage, the litigation will not stop Vonage from continuing to provide quality VoIP service to our millions of customers.” He also promised that “Our fight is far from over. We remain confident that Vonage has not infringed on any of Verizon's patents – a position we will continue vigorously contending in federal appeals court – and that Vonage will ultimately prevail in this case.”

Recently oft-quoted Sharon O’Leary, Vonage’s executive vice president, chief legal officer and secretary actually claimed that “Vonage relied on open-standard, off-the-shelf technology when developing its service. In fact, evidence introduced in court failed to prove that Vonage relied on Verizon’s VoIP technology, and instead showed that in 2003 Verizon began exploring ways to copy Vonage’s technology.”

Company numbers also show that Vonage has achieved 19 consecutive quarters of double-digit revenue growth, doubled revenues to $607 million in 2006 alone, and added nearly 1 million net subscriber lines last year. However, another number is far more damning (as though Vonage needed things to get worse): The week closed with Vonage Holdings Corp. shares dropping 26 percent to close at $3 on the New York Stock Exchange, unbelievably a 52-week low.