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Verizon Lets Vonage Off The Hook |
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Written by Adam Gosling
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Friday, 26 October 2007 |
In a surprise move Verizon has agreed to settle its patent dispute with
the embattled VoIP service provider Vonage. While the settlement
revenues might come in handy for Verizon, it looked in a good position
to drive the competitor out of business, but has held back for a
relatively meagre settlement.
The actual terms of the settlement are not yet settled and, oddly
enough are to be determined by the outcome of the legaly process,
despite the two agreeing to cease the dispute.
At worst the settlement will cost Vonage an additional US$32
million over and above the US$88 million already accrued and held in
escrow after the court rulings earlier this year found Vonage guilty of patent infringements.
The US$88 million includes a US$66 million cash-collateralised
bond, a $12 million second-quarter escrow payment, and a $10 million
third-quarter escrow payment made in the fourth quarter of 2007.
The dispute began in
June last year and by March 2007, a jury held that Vonage was infringing on three Verizon
patents, awarding the company US$58 million in damages and with the judge
issuing an injunction against Vonage's use of the technology.
However, Vonage managed to get a stay of execution by appealing the decision. In September the U.S. Court of Appeals for the
Federal Circuit upheld the first court's decisions on infringement,
validity, and injunction as to two of the Verizon patents (the '574 and
'711) and remanded as to the third patent (the '880). Vonage filed a
petition for rehearing which is pending in the Court of Appeals.
Although the two company's have now agreed to resolve the lawsuit,
in a deal that seems to waste the Court's time, the terms of the
resolution depend on how the Court of Appeals decides Vonage's pending
petition for rehearing regarding two of the Verizon patents (the '574
and '711).
If Vonage wins rehearing on either the '574 or '711 patent
or if the injunction is vacated as to the '574 or '711 patent, Vonage
will pay Verizon US$80 million. If Vonage does not win rehearing on
either the '574 or '711 patent, or if the stay is lifted reinstating
the injunction, Vonage will pay Verizon US$117.5 million to Verizon and another US$2.5 million to "certain charities".
"We're
pleased to put this dispute behind us and believe this settlement is in
the best interests of Vonage and its customers," said Sharon O'Leary,
Vonage Chief Legal Officer. "This settlement removes the uncertainty of
legal reviews and long-term court action and allows us to continue
focusing on our core business and customers."
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