Vonage and Verizon

Yesterday Vonage Holdings (2.2 million customers) was ordered by a federal jury in Alexandria to pay $58 million to Verizon Communications. The jury ruled that Vonage has infringed on Verizon patents by connecting the Vonage Internet based voice network to the Verizon Public Switched Telephone Network (PSTN).

There were actually three Verizon patents that the jury said we infringed upon by Vonage – the most significant one involves technology that links Internet voice with the PSTN. The two others involved call forwarding and wireless headsets.

In addition Verizon has asked the court to issue a permanent injunction that would stop Vonage from ever connecting to the PSTN. A permanent injunction would allow Vonage customers to only communicate with other Vonage customers using the Internet – something you can already do with many free services like Skype, Yahoo IM and Google Talk. There is a hearing scheduled for March 23 based on Verizon’s injunction request.

Last year the Supreme Court ruled to give judges in patent cases more latitude so the ruling comes as no surprise to both Vonage and Verizon. It will be interesting to see how this affects other providers offering similar domestic and long distance services.