WISCREPORT.COM (10/25/07) - Vonage and Verizon have announced they have agreed to resolve their dispute over patent rights. Verizon had charged Vonage with infringing on three patents held by Verizon in the Vonage VoIP telephone process.

Vonage says the cost of the settlement will be capped at a maximum of $32 million, in addition to the $88 million already accrued and held in escrow.

The final terms of the resolution depends on how the Court of Appeals decides Vonage's pending petition for rehearing regarding two of the three Verizon patents.

The $88 million includes a $66 million cash-collateralized bond, a $12 million second-quarter escrow payment, and a $10 million third-quarter escrow payment made in the fourth quarter of 2007.

Vonage and Verizon earlier today announced they have agreed to resolve their patent lawsuit. The terms of the resolution depend on how the Court of Appeals decides Vonage's pending petition for rehearing regarding two of the Verizon patents (the '574 and '711).

If Vonage wins rehearing on either the '574 or '711 patent or if the injunction is vacated as to the '574 or '711 patent, Vonage will pay Verizon $80 million.

If Vonage does not win rehearing on either the '574 or '711 patent, or if the stay is lifted reinstating the injunction, Vonage will pay $120 million, which includes $2.5 million payable to certain charities.

"We're pleased to put this dispute behind us and believe this settlement is in the best interests of Vonage and its customers," said Sharon O'Leary, Vonage Chief Legal Officer.

"This settlement removes the uncertainty of legal reviews and long-term court action and allows us to continue focusing on our core business and customers," O'Leary says.

The latest decision in the litigation came on September 26, 2007 when the U.S. Court of Appeals for the Federal Circuit partially remanded a March 8 jury verdict in the U.S. District Court of Alexandria, Va. that the company infringed on three Verizon patents.

The appellate court remanded the infringement verdict on the 880 patent and affirmed the verdict on one patent claim in each of the 574 and 711 patents.

The appellate court vacated the entire damages award of $58 million and the 5.5 percent royalty, and directed that the trial court retry those aspects of the original case.

Vonage's petition for a rehearing was filed on October 10, 2007.