John Paczkowski

Recent Posts by John Paczkowski

OED to Redefine ‘Carnage’ as ‘Vonage’

These patents are invalid. We don’t owe them a dime.”

Some famous last words from Vonage lawyer Louis Jameson, Sept. 21

ragingbull.jpgIf things truly are destined to get worse before they get better, then Vonage may have something to look forward to. Yesterday afternoon the Internet telephony company suffered another costly legal defeat when a federal jury ordered it to pay $69.5 million in damages and a 5% royalty on future revenues to Sprint Nextel for using its patents.

It’s an ugly turn of events for the long-suffering Vonage, which has been beaten mercilessly into submission by legal setbacks since it went public in May 2006. Back in March, the company lost a similar patent-infringement case to Verizon and was ordered to pay more than $58 million in damages and a 5.5% royalty on future revenue.

Vonage was, obviously, dismayed by yesterday’s ruling and plans to appeal. “We are disappointed that the jury did not recognize that our technology differs from that of Sprint’s patents,” Sharon O’Leary, chief legal officer for Vonage, said in a statement. “Our top priority is to provide high-quality, reliable digital phone service to our customers. Vonage has already demonstrated that it can keep its focus on customers and on its core business while managing ongoing litigation.”

Question is, does Vonage have enough money to maintain that focus? As of June 30, it only had $344 million in cash. Of that, $66 million is restricted cash used as collateral for the Verizon bond. Now it may be down another $69.5 million. And who knows what sort of financial damage it might suffer from the 14 purported class-action cases against it over its initial public offering. No matter how you spin it, things are looking pretty bleak.

“Poor Vonage, they can’t get a break,” TeleGeography analyst Stephan Beckert told Bloomberg. “I don’t think it’s any secret that they’re not a well company.”