Vonage: patent smackdown won't bring shutters down

We will survive

Vonage today moved to reassure its two million customers that their internet phone service will not be disrupted and investors that their cash will be safe if it loses a patent lawsuit to Verizon.

A US District Court in Eastern Virginia last week heard Verizon claim that Vonage owes it at least $197m in licensing fees and damages for patents related to billing, fraud detection, call forwarding for VoIP (Voice over Internet Protocol), and other technologies.

According to Verizon, Vonage has used its intellectual property to steal its customers. Vonage says the suit is frivolous, and an attempt to stifle competition from new entrants.

Today's statement from Vonage aims to calm fears that a loss might imperil the firm's finances. "First and foremost," chief executive Mark Snyder said, "we are confident we have not infringed on any of Verizon's patents and, in any case, we believe the Verizon patents are invalid.

"Our financial reserves would allow us to continue normal operations regardless of the outcome. In addition, we are confident that regardless of how this litigation is ultimately decided, Vonage's customers will see no change whatsoever to any aspect of their phone service."

He said Vonage's coffers stood at $499.7m in cash and equivalents at the end of last year. Losses for the independent telco were slowing at the last count, clocking in at $234m in 2006.

Verizon filed the suit in June last year, soon after Vonage had floated on Wall Street. Its price has fallen by more than half since the initial offering.

The trial began last week, and the eight-man jury is expected to deliver a verdict next week. ®