Verizon sues Vonage over VoIP patents

Out-Law News | 21 Jun 2006 | 11:35 am | 1 min. read

Internet telephony pioneer Vonage is being sued by telco Verizon Communications in a patent dispute over voice over internet protocol (VoIP) technology.

Verizon has claimed in a complaint to a Virginia court in the US that Vonage has violated at least seven of its patents, including those relating to connecting internet calls with traditional networks. Vonage said it will fight the claims.

The dispute adds to Vonage's woes. The US VoIP firm went public in May and has been the US markets' worst initial public offering (IPO) performer this year. Shares which were listed at $17 have fallen by 44% in total, and dipped by 11.7% to $8.48 on the announcement of the Verizon case.

In a case which is expected to last over a year, Vonage will have to defend itself against its more established competitor. It is also defending nine class action law suits in relation to its stock market flotation.

The lawsuit does not demand that Vonage immediately halt its services, asking the court to halt the use of the alleged patented technology only if Verizon wins its case.

"Vonage respects the valid intellectual property rights of others," said Vonage in statement. "Vonage believes that its services have been developed with its own proprietary technology and technology licensed from third parties and intends to vigorously defend the lawsuit."

"Vonage has not previously been notified by Verizon regarding the seven patents identified in the lawsuit and has engaged its outside intellectual property counsel to investigate the matter," said the company.

The suit over the seven patents comes from Verizon Services Corp and Verizon Laboratories Inc.

Vonage was an early pioneer of VoIP telephony, but analysts have put the falling share price down to increasing competition from bigger operators. Traditional telcos are now spending heavily to launch their own companion VoIP services, and analysts fear that Vonage may not be able to compete with such renowned brands.

"I'm getting more and more concerned," Pali Research media analyst Richard Greenfield told The New York Times. "It increasingly feels like the competitive dynamics are getting more severe."