Vonage Shares Halt Trading in Wake of Federal Injunction March 2007

Vonage Holdings Corp. shares stopped trading on Friday afternoon after a federal judge permanently barred the company from using technology owned by Verizon Communications Inc.

The decision came two weeks after a jury declared that Vonage had infringed on Verizons intellectual property. The technology involves connecting IP calls to the PSTN. On March 23, U.S. District Judge Claude Hilton said Vonage can no longer use some VoIP technologies key to its service.

Vonage stocks subsequently dropped 6.2 percent to $3.80 per share and the company halted trading at 12:13 p.m. Eastern on Friday.

The court scheduled another hearing in two weeks to address Vonages request for a stay. Hilton said he will not sign the injunction order before that hearing.

A federal jury on March 8 ordered Vonage to pay Verizon $58 million plus 5.5 percent royalty fees on all of its future revenue. Vonage Chairman Jeffrey Citron said in a statement the following day that the company was devising technical workarounds to avoid infringing on Verizons patents, adding that Vonage would not go out of business.

Vonage executives said they already have drafted an appeal and will file it as soon as possible.

“Our fight is far from over,” said CEO Mike Snyder in a prepared statement. “We remain confident that Vonage has not infringed on any of Verizon’s patents a position we will continue vigorously contending in federal appeals court and that Vonage will ultimately prevail in this case.”

Snyder said customers should experience no change in phone service.

Meanwhile, the company continued stating that it used open-standards technology when developing its VoIP service, and that Verizons claims are erroneous.

In fact, evidence introduced in court failed to prove that Vonage relied on Verizon’s VoIP technology, and instead showed that in 2003 Verizon began exploring ways to copy Vonage’s technology,” said Sharon O’Leary, Vonage’s executive vice president, chief legal
officer and secretary.