TELECOM Digest OnLine - Sorted: Vonage Sending Mixed Signals on Technology Patch

Vonage Sending Mixed Signals on Technology Patch

Bruce Meyerson, AP Tech (
Mon, 16 Apr 2007 16:58:23 -0500

By BRUCE MEYERSON, AP Technology Writer

Vonage Holdings Corp. is delivering conflicting messages on its
ability to deploy a substitute technology should the Internet phone
provider lose its bid to overturn a jury's verdict that it infringed
on Verizon Communications Inc.'s patents.

Depending on the audience, Vonage has been alternately reassuring and
bleak: Customers and investors are told a technological workaround is
feasible to prevent a disruption in phone service. But in court,
Vonage declares doubt about that same possibility as it seeks
permission to keep using the disputed technology during the appeal.

"While Vonage has studied methods for designing around the patents,
the removal of the allegedly infringing technology, if even feasible,
could take many months to fully study and implement," the company said
in a filing submitted to the U.S. Court of Appeals on April 6 and
released to the public on Friday.

On its Web site, Vonage offers customers a far different prognosis for
working around the patents, which relate to the way that
Internet-based calls are connected to the traditional telephone

"There are many options available to us and we are preparing to
implement them if necessary," the company said in a news update for
customers. "Vonage is also continuing to develop and design technical
workarounds that would prevent Vonage's phone service from infringing
upon Verizon's patents."

On Thursday, Vonage founder and interim Chief Executive Jeffrey A.
Citron struck more of a middle ground between those stances in
speaking with investment analysts after the company announced the
resignation of CEO Michael Snyder. Citron said a workaround is in
development, but declined to discuss details or timing.

"We are in the design phase of those workarounds, and we are not going
to be able to provide much more than that at this current juncture,"
Citron said in a transcript of the conference call provided by the

But, unlike the long-term uncertainty depicted in Vonage's court
filing, Citron indicated that hard details on a workaround were
somewhat imminent: "We expect on our quarterly update call, which will
be in May, to provide a better picture as to timelines with regards to
those efforts."

The most consistent theme in all venues has been Vonage's confidence
it will win its appeal, making the need for any emergency
technological measures moot.

Last month, a federal jury in Virginia found Vonage guilty of
infringing on Verizon's patents. The trial judge decided that while
Vonage appeals the verdict, it should be allowed to serve existing
customers but barred from signing up new customers using the disputed

An appeals court is expected to decide soon whether the injunction
relating to new customers should be put on hold during the appeal.

In arguing for a stay of the injunction, Vonage's filing said that
Verizon's interests were amply protected without blocking new customer

"A stay of the injunction will not cause substantial harm to Verizon,"
the filing said. "Vonage's required payment of 5.5 percent royalty
revenues will compensate for any harm to Verizon during pendancy of
the appeal."

Verizon, however, has expressed doubt about Vonage's financial
resources for compensation should it lose the appeal. It has argued
that Vonage should be forced to set aside its cash, which totaled $420
million at the end of March, rather than continuing with its plan to
spend hundreds of millions on advertising this year.

Shares of Vonage fell 19 cents, or 5.6 percent, to $3.20 in Monday
trading on the New York Stock Exchange.

Copyright 2007 The Associated Press.

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