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Verizon wins $58M in Vonage lawsuit

A federal jury ruled in favor of Verizon Communications in a patent lawsuit against Vonage Holdings. Vonage must pay the telecom giant $58 million in damages plus royalties for infringing on three patents for Internet telephone technology.

In addition, Vonage is required to pay Verizon 5.5 percent of the revenues the company makes from technology associated with the infringed patents. Verizon is also seeking an injunction against Vonage to stop use of the technology. The federal judge in Alexandria, Va., who presided over the trial has set a hearing for March 23 to consider the injunction. In a statement, Vonage said it would appeal any injunction.

Vonage’s stock, which was trading at $4.86 a share, was halted shortly after 3 p.m. when the verdict was announced. Shares have dropped 12 percent since the trial began on Feb. 21. Shares of Verizon, which have declined 4.7 percent since the trial started, rose 2.2 percent to $36.48 after the news.

Verizon said in a statement that it was pleased with the trial’s result, adding that patents are “central” to its business.

While Verizon had initially sought $197 million in damages, the verdict is a blow to Vonage, industry analysts say. “It will eat into its current cash position and will make it even harder for the company to reach profitability,” says Clayton Moran, a senior vice president of research firm Stamford Group.

Verizon Communications is a parent company to Verizon Wireless. Vonage offers Internet calling software, and has made indications over the years that it could move into the wireless industry, potentially through an MVNO offering.

Amanda Fung is a reporter with Crain’s New York Business, a sister publication to RCR Wireless News. Both publications are owned by Crain Communications Inc.

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