For now, it’s ‘business as usual’ for Vonage

WASHINGTON — Internet phone carrier Vonage Holdings Corp. won relief Tuesday from a potentially crippling court order that would have barred it from signing up new customers as punishment for infringing on patents held by Verizon Communications Inc.

The U.S. Court of Appeals for the Federal Circuit granted the stay of a trial judge’s injunction on Tuesday afternoon, just hours after hearing arguments. A temporary stay had been issued earlier this month, but Tuesday’s order will remain in effect throughout the appeal.

Vonage’s battered stock price rallied nearly 30 percent after the decision, which allows it to keep signing up new customers while still using the disputed technology.

Verizon took solace in the fact that the appeals court set an expedited schedule for the appeal, with a hearing scheduled for June 25.

Vonage is seeking to overturn a jury’s verdict in March that it infringed on three Verizon patents in constructing its Internet phone system. Following the verdict, the trial judge had ordered a compromise injunction, allowing Vonage to keep serving its 2.4 million existing customers during the appeal, but barring any new subscribers.

Vonage lawyer Roger Warin told the three-judge appellate panel that Vonage faced a “real risk of insolvency” if that injunction were allowed to take effect. Vonage has argued that such an injunction would have amounted to a slow death because the company loses more than 600,000 customers a year to subscriber “churn” even as its overall subscriber base continues to grow.

Verizon deputy general counsel John Thorne said Verizon expects the jury verdict will be upheld on appeal, at which point an injunction could again be implemented.

“An appeal could have taken a year or longer; now it will be argued in just two months,” Thorne said in a statement.

Vonage’s chairman and interim chief executive officer, Jeffrey Citron, issued a statement thanking the appeals court for its ruling.

“It’s business as usual for us. … We remain focused on growing and strengthening our business and driving toward profitability,” he said.

Rebecca Arbogast, a Washington-based industry analyst with Stifel Nicolaus, said that while the stay is clearly a victory for Vonage, the expedited time frame causes problems for two reasons: It gives the company less time to develop a workaround technology should the appeal fail.