Vonage Settles With Verizon

Shares of Vonage Holdings Corp. (NYSE: VG) soared nearly 50 percent this morning after the company wrapped up its second patent dispute in less than a month.

This time, Vonage settled with Verizon Communications Inc. (NYSE: VZ), agreeing to pay the wireline service provider up to $120 million. (See Vonage Settles With Verizon.)

Under the terms of the settlement, the amount Vonage will pay depends on the outcome of an appeal pending in a case it lost against Verizon in March of this year. (See Vonage Loses Verizon Appeal, Vonage Verdict Affirmed, and Vonage Ordered to Pay $58M to Verizon.)

If the appeals court decides to rehear the case, Vonage will pay Verizon $80 million. If the court rejects the appeal, Vonage will pay Verizon $117.5 million, with an additional $2.5 million going to charity.

Vonage had already placed $80 million in escrow while the case was being heard by the appeals court. That included the $58 million in damages and the 5.5 percent royalty payments also awarded to Verizon.

While bringing an end to some of Vonage's legal uncertainty, the settlement will also allow the VOIP services provider to use technology covered by the Verizon patents in question.

Earlier this month, Vonage agreed to pay mobile operator Sprint Corp. (NYSE: S) $80 million to end a patent dispute. (See Vonage Soars on Sprint Settlement and Vonage, Sprint Settle.)

That settlement came after Vonage lost a patent infringement case in September and was ordered to pay Sprint $69.5 million. The Sprint settlement included $35 million for past use of its technology, $40 million for future use, and a $5 million prepayment.

Vonage is not completely out of the woods yet. Earlier this week, AT&T Inc. (NYSE: T) filed a lawsuit claiming that Vonage violated a patent it holds that describes how calls are compressed into data form in short packets. (See AT&T Sues Vonage.)

Regardless, investors were happy to see Vonage's dispute with Verizon settled, driving the stock up 73 cents (47.7%) to $2.27 in morning trading.

— Ryan Lawler, Reporter, Light Reading