By David Hatch
(Tuesday, April 10) With its future potentially in the hands of the courts, the Internet telephone provider Vonage is seeking to project a public image of calm amid a legal storm.
Vonage Executive Vice President and Chief Legal Officer Sharon O'Leary did not mention the company's protracted patent dispute with Verizon Communications in prepared opening remarks for a Senate Commerce Committee hearing. It is also business as usual for Vonage's marketing, with the company running upbeat television advertisements that tout its low-cost phone service as revolutionary.
But the ad spots belie Vonage's tenuous situation: Last Friday, a U.S. district judge in Alexandria, Va., sought to ban the company from adding new subscribers after a federal jury previously found Vonage in violation of three Verizon patents.
Later Friday, Vonage won a temporary reprieve from the U.S. Court of Appeals for the Federal Circuit in Washington, which has scheduled April 24 oral arguments on Vonage's request for a permanent stay of the judge's ruling. The federal circuit will decide whether Vonage can add new customers during a lengthy appeal of the jury verdict, a source explained.
As a result of the developments, Vonage's already struggling stock has plummeted to an all-time low. Chief Executive Officer Mike Snyder recently countered in a statement that the market overreacted and that rumors of the company's demise are exaggerated.
Vonage, whose Internet phone technology competes directly with traditional providers like Verizon, still has options. It can develop a "work-around" solution to avoid infringing on Verizon's patents. Vonage also could reach a settlement.
But the investment firm Stifel Nicolaus warned Friday that the work-around avenue has shortcomings. "Verizon would closely inspect any work-around to determine whether it can make a claim that the work-around itself violates Verizon's patents, and thus, the injunction," the firm wrote.
Vonage's precarious future was the backdrop for Tuesday's hearing. O'Leary focused on comparatively safer ground: Vonage's commitment to offering "enhanced 911" service that routes emergency calls to nearby 911 centers and automatically displays phone numbers and addresses. The issue is particularly critical for Internet phone customers because they could use their home phone numbers from multiple locations.
"There is no higher priority within Vonage than [delivering] enhanced 911 service to all of our customers nationwide," she wrote, adding that Vonage delivers E911 to 95 percent of its 2.2 million customers.
But in written testimony, Wanda McCarley, president of the Association of Public-Safety Communications Officials, or APCO, said more needs to be done to ensure that when consumers adopt new telecommunications services, "the provider is able to comply with current public safety obligations."
Jason Barbour, a 911 center director in Johnston County, N.C., who testified on behalf of the National Emergency Number Association, expressed support in his written remarks for pending legislation. That bill, S. 428, seeks to bolster usage of E911, which is not available from all providers.