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Vonage Wins Court Stay in Verizon Patent Battle

Reuters
Tuesday, 24 Apr 2007 | 7:14 PM ET

Internet phone company Vonage Holdings won a legal victory that sent its shares sharply higher when a U.S. appeals court ruled on Tuesday the company can continue signing up new customers while it appeals a patent infringement ruling.

The U.S. Court of Appeals for the Federal Circuit granted Vonage's request for an extended stay of a lower court injunction while it appeals a jury finding that it infringed patents held by Verizon Communications for making
calls over the Internet.

Vonage News
A higher court rules that Vonage can, indeed, continue to sign up new members until the patent case is heard, with Jim Goldman, CNBC Silicon Valley bureau chief

"In layman's terms, it means business as usual," said Brooke Schulz, a spokeswoman for Vonage.

The federal circuit appeals court, which specializes in hearing patent cases, put Vonage's appeal on a fast-track schedule, with arguments set for June 25.

It takes the appeals court more than a year to rule on most cases. But lawyers involved in the Vonage appeal said it could be decided as soon as this summer.

"It's a reprieve, but possibly a short reprieve," said Rebecca Arbogast, an analyst with Stifel Nicolaus,

Vonage shares jumped as much as 50% following the ruling before paring their gains to close up 28% at $3.72 on the New York Stock Exchange. Verizon shares closed 5 cents higher at $37.60.

At issue was an April 6 ruling by a federal court in Alexandria, Va., barring Vonage from adding new customers while it appeals the patent infringement finding.

Verizon is seeking to bar Vonage from any use of its patented technologies after a jury in March found Vonage had infringed three patents. Verizon's deputy general counsel, John Thorne, praised the decision by the appeals court to expedite the case, saying it would limit Vonage infringement of Verizon patents.

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"We expect the unanimous jury verdict of infringement will be upheld," Thorne said in a statement.

The extended stay ruling came about two hours after the appeals court heard arguments from lawyers representing Vonage and Verizon.

Vonage lawyer, Roger Warin, argued at Tuesday's hearing that the trial judge in the case had misconstrued key claims in three of the patents at issue and given the jury the wrong instructions on how to interpret technical terms such as data "translation" and "destination address."

Lawyers for both companies faced a barrage of technical questioning by three judges during the hearing that lasted about 90 minutes.

Vonage said after the ruling it would pay a quarterly royalty of 5.5% into a reserve during the appeals process and post a $66 million bond as required by the court.

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