By David Hatch
(Monday, June 25) A federal appeals judge indicated that a compromise may be needed to prevent the Vonage Internet telephone firm from going out of business due to a legal battle with Verizon Communications.
"Shouldn't that be a consideration in framing the injunction?" Judge Timothy Dyk asked during oral arguments in an intellectual property dispute involving the companies. He was referring to an injunction handed down in March by a U.S. district judge in Alexandria, Va., stating that Vonage had infringed on three Verizon patents.
New Jersey-based Vonage was ordered to pay $58 million, which has been placed in escrow pending the outcome of its appeal. The firm also must pay royalties totaling 5.5 percent of revenue derived from use of the patents, which enable customers to access calling features and allow Internet-delivered calls to connect to the larger telecom network and wireless handsets.
During Monday's proceedings before a three-judge panel of the Federal Circuit Court of Appeals, Dyk spoke his mind about Vonage's fate while Chief Judge Paul Michel and Judge Arthur Gajarsa remained silent on that issue.
Emphasizing that Verizon's primary interest is to gain customers and not put Vonage out of business, Dyk told the packed, standing-room only courtroom, "I'm just wondering if there's some middle ground." He further suggested that it might be advantageous for the lower court to give Vonage time to develop solutions that sidestep the patents.
But Richard Taranto, the attorney representing Verizon, responded that an "open deadline" should not be permitted because it would result in "continued harm" for his client.
Vonage has asserted publicly that Verizon is using the infringement allegations as cover for its real goal: to derail a competitor. In a recent interview, John Thorne, deputy general counsel at Verizon, insisted that his company only seeks to protect its intellectual property.
"We've attempted repeatedly to settle with them," he said, adding, "We wouldn't do that if we were trying to put them out of business."
The appeals court focused much of its attention on whether the district judge properly defined various technical terms related to Vonage's services and whether the judge properly explained the definitions to the jury.
Roger Warin, the attorney representing Vonage, told reporters that while the company thinks the injunction is unjustified because Verizon did not show "irrevocable harm," Vonage would accept a new trial. "We think the [lower court] trial judge committed errors ... by not defining two claim terms," he said, "We think that alone should result in a new trial."
Warin appeared open to Dyk's idea of seeking "middle ground" to give Vonage time to develop alternate solutions but lamented that Vonage still would have to pay the fine and royalties.
"The argument went well for us. I'm optimistic. I expect a decision to issue promptly," Thorne said.
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