|FROM ||Ruben Safir
|SUBJECT ||Subject: [NYLXS - HANGOUT] Re: [nylug-talk] Verizon price riot
Vonage Sued by Verizon Over Internet Phone Patents (Update4)
June 19 (Bloomberg) -- Vonage Holdings Corp., whose stock has dropped 48
percent since its May debut, was sued by Verizon Communications Inc. for
infringing seven of its patents for Internet telephone technology.
Vonage, a pioneer in Voice over Internet Protocol, or VoIP, said it plans
to fight claims it used Verizon's technology, including a process that
enables Internet callers to reach traditional telephone customers. The
lawsuit, filed June 12 in federal court in Richmond, Virginia, seeks
cash compensation and an order stopping Vonage's alleged infringement.
``It just creates a level of uncertainty that investors have a hard
time handicapping,'' said Albert Lin, an analyst at American Technology
Research in San Francisco. He rates Vonage a ``buy.'' The two sides
probably will agree to settle after a drawn out battle, Lin said.
Vonage shares dropped 9.3 percent, adding to criticism from investors
and analysts who warned of competition by larger rivals before its $531.3
million initial stock sale, the worst so far this year. Vonage also faces
a class-action lawsuit over claims it violated securities laws when it
pre-sold 13.5 percent of its stock offering to customers of its service.
Verizon claims that Vonage infringed its patented VoIP technology, which
allows sound to be sent over the Web between computers, to develop a
service that lets the calls reach traditional phone lines.
``Vonage does not currently own any issued U.S. patents,'' Verizon said
in the lawsuit. ``Instead, Vonage relies on the intellectual property
developed by Verizon in delivering its infringing product and services.''
Vonage shares fell 89 cents to $8.71 at 11:24 a.m. in New York Stock
Exchange composite trading. Verizon shares rose 14 cents to $32.68 and
are up 8.7 percent so far this year.
New York-based Verizon, the second-biggest U.S. phone company behind
AT&T Inc., said Vonage is ``aggressively marketing'' its services and
targeting Verizon customers, with some 1.1 million switching to Vonage
in the past 15 months, the suit said.
The complaint also claimed that Holmdel, New Jersey-based Vonage infringed
patents for billing and fraud detection, call services including call
forwarding and voicemail and the use of Wi-Fi handsets in a VoIP network.
Vonage spokesman Mitchell Slepian declined to comment beyond the company's
statement that it would fight the lawsuit.
Vonage stock has slumped from an IPO price of $17 on May 23 after investor
concerns that the company will be hurt by growing competition from rival
providers including AT&T and Comcast Corp.
Vonage has amassed $361.2 million in losses in three years while
attracting 1.6 million subscribers. The company, among the first to
offer Internet-calling, plans to use the IPO proceeds to fund a ramp up
in marketing spending.
The case is Verizon Services Corp. v. Vonage Holdings, 06- cv-682,
U.S. District Court for the Eastern District of Virginia.
To contact the reporters on this story: Rebecca Barr in New
York at rbarr1-at-bloomberg.net; Susan Decker in Washington at
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