Vonage and Verizon have announced that they have reached a settlement in their patent dispute that saw Verizon win a $58 million judgment after a trial earlier this year. Under the terms of the agreement, the exact amount of the payout depends on how the US Court of Appeals for the Federal Circuit rules on Vonage's request for a rehearing on two of the three patents in question.
Should the full Court decline to take up the case, Vonage will owe Verizon $120 million. If it agrees to rehear it, the payment will be capped at $80 million. Vonage currently has $88 million in escrow, meaning that its maximum additional liability will be $32 million.
Two of the three disputed patents cover translating between IP addresses and phone numbers; those are the two still in front of the appeals court. The third patent, which the appeals court remanded back to the lower court for a retrial, covers the concept of connecting a wireless device to a VoIP network. Vonage had argued that none of the patents would pass the new obviousness standard mandated by a recent Supreme Court ruling, but the settlement means that the obviousness of the patents may never be tested in court.
"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."
This marks the third patent dispute settlement for Vonage this month. A couple of weeks ago, the VoIP carrier and Sprint settled another patent dispute for $80 million. That agreement also gave Vonage full access to Sprint's voice over packet patent portfolio. Vonage also settled another infringement lawsuit in the last few weeks, this one filed by Klausner Technologies.
Unfortunately, Vonage is not out of the woods yet. Last week, AT&T decided to attempt to extract its pound of patent flesh from the VoIP provider, filing a multimillion-dollar patent infringement lawsuit. The AT&T patent in question covers a means of enabling access to an Internet phone system via a standard phone; Vonage may decide to try and settle this instead of taking its chances in court.
It's great for Vonage to get its IP mess sorted out, but with only $276 million in cash on hand as of June 30, these settlements are taking a heavy financial toll on the company. If the VoIP company is unable to stem its loss of subscribers and stabilize its operations, resolving the patent situation won't make much difference to its outlook.