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VoIP Systems

Vonage Soars on Sprint Settlement

Vonage Holdings Corp. (NYSE: VG) has agreed to pay Sprint Communications $80 million to end its patent dispute with the mobile operator.

The fee includes $35 million for past use of Sprint Corp. (NYSE: S)'s technology, $40 million for future use, and a $5 million prepayment. (See Vonage, Sprint Settle.)

While it's not a legal victory for Vonage, investors are relieved that at least one of the company's two major patent disputes is quieted. Vonage is still awaiting a final ruling on its patent dispute with Verizon Communications Inc. (NYSE: VZ), where Vonage claims to have developed workarounds for two of the three patents in question. (See Vonage 'Workarounds' May Ease Patent Pain and Vonage Loses Verizon Appeal.)

Shares of Vonage are up 71.3 percent (82 cents) to $1.97 so far today. It's still a far cry from the company's IPO price of $17.

Two weeks ago, a federal jury ruled that Vonage had violated Sprint's patents and ordered the VOIP provider to pay $69.5 million in damages. (See Vonage Guilty Again.) Vonage had planned to appeal the decision but instead opted to settle with Sprint to avoid having to develop more workarounds.

Recently, a Federal Appeals Court ruled that Vonage was guilty of violating two of three Verizon patents but sent the third patent dispute back to the district court to be retried.

For the Verizon case, Vonage still has about $80 million sitting in escrow for possible damages and royalties.

— Raymond McConville, Reporter, Light Reading

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