Judge bars Vonage from signing up new customers

A U.S. district court judge on Friday barred VoIP provider Vonage from signing up new customers after the company lost a patent infringement lawsuit to Verizon.

Judge Claude Hilton of the U.S. District Court for the Eastern District of Virginia denied Vonage's request to stay an injunction pending its appeal of a patent infringement ruling. On March 8, a federal jury found that Vonage infringed on three Verizon patents and must pay $58 million in damages plus royalties.

Verizon sued Vonage last June, alleging the VoIP provider had violated seven of its patents involving packet-based calling technology.

Hilton issued a permanent injunction against Vonage in late March but delayed its implementation while considering Vonage's request for a stay. Vonage has said it would appeal the injunction to a higher court if it failed with Hilton.

Current customers won't be affected by the injunction, Vonage has said.

A Vonage spokeswoman said Friday that the company is still evaluating Hilton's ruling and that the company would release a statement later. A Verizon spokesman said that company also would release a statement later Friday.

Verizon praised Hilton's decision, saying it expected the judge's ruling to be upheld on appeal.

"Judge Hilton exercised the court's equitable discretion to craft a middle path that allows Vonage to continue serving its existing customers while protecting Verizon's patents from increased infringement during the appeal process," John Thorne, Verizon senior vice president and deputy general counsel, said in a statement.

The ruling creates major questions for Vonage's future, VoIP analysts said.

"It just keeps getting worse and worse for them every week," said Will Stofega, research manager for VoIP services at IDC. "For the judge to rule they can't sign up new customers, that's the whole idea in terms of their strategy."

Vonage has said it has an alternative technology it can use that doesn't use the patents claimed by Verizon. "Now is the time to demonstrate they have it," Stofega said.

With no ability to grow, Vonage's future is in doubt, added Jeff Kagan, an independent telecom analyst. "Vonage was the poster child for the new VoIP technology, but now everyone is a competitor, and their importance is limited," he said. "The big question is about the company's survival, not the VoIP technology."

This story was updated on April 6, 2007