The patent dispute case between Verizon Communications Inc. (NYSE: VZ) and Vonage Holdings Corp. (NYSE: VG) took an interesting turn today when a U.S. Court of Appeals judge suggested that the two sides find a middle ground.

"Isn't there some kind of a middleground in these cases when the injunction would put someone out of business?" asked Judge Timothy B. Dyk, part of the three-judge panel.

Verizon's lawyer Richard Taranto argued that Vonage has never asked for such a middle ground in court. He says Vonage wanted all or nothing -- it either wanted the injunction to be thrown out or it wanted the entire case retried on the grounds that anything less would put Vonage out of business.

Vonage, though, didn't exactly go that far with the weeping and wailing in its conference calls when asked to address its legal fight with Verizon. In the company's last earnings call, chairman Jeffery Citron remarked that the company had reached viable workarounds for two of the patents in question and was close to reaching one for a third. (See Vonage Loses Less.)

So is Vonage is in the fight of its life? Or is it just adding some life to its fight?

Vonage says its position on whether a court loss to Verizon would be fatal has changed since early on in the patent dispute. "What people are misunderstanding is that we had made those arguments in the lower court when we didn't have a stay in place," says Vonage spokeswoman Brooke Schulz. "We've since had the time to develop these workarounds."

Verizon's regulatory and legislative rep, David Fish, says Verizon would consider finding a middleground with Vonage. But if it did, he says, the Appeals court would probably uphold the lower court's decision, and then the court would delay any further ruling until both sides had time to work out a plan.

Vonage's Schulz says that Vonage has no comment on finding a middle ground with Verizon nor on any of the issues that transpired today in court.

For those of you just joining us, back in March, U.S. District Court judge Claude Hilton found Vonage guilty of infringing upon three of five patents that Verizon had alleged it was illegally using and ordered Vonage to pay $58 million in damages and royalties of 5.5 percent going forward. (See Vonage Ordered to Pay $58M to Verizon.)

A District Court judge would later enforce an injunction on Vonage barring it from signing up new customers, only to have an Appeals Court overrule the decision and grant Vonage a temporary stay hours later. (See Vonage Dissed at Injunction Junction and Appeals Court Lifts Vonage Injunction.) Vonage would eventually win a permanent stay from the injunction while the Appeals court hears the case. (See Vonage Wins Stay.)

Now that oral arguments from both sides have been heard by the Appeals Court, a written decision is expected by late July.

— Raymond McConville, Reporter, Light Reading