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Vonage shares drop after court decision

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
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Marguerite Reardon
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Shares in IP telephony provider Vonage dipped more than 10 percent to $3.03 per share Monday on the first day of trading since a judge in Virginia issued an injunction that would halt the company from adding new customers.

Even though a federal appeals court granted a temporary stay to the injunction, some investors still dumped shares of Vonage, in what could be a sign of faltering confidence in the company. Vonage tried to reassure investors that the company will continue to add new customers and provide uninterrupted service to its current customers.

In a press release issued Monday, the company also emphasized its confidence that it will eventually win its case on appeal.

But it also looks like Vonage is hedging its bets in case it loses the appeal. For one, the company said it is still working to design its service around the Verizon patents. And it also said Monday that it will pay into escrow a quarterly royalty of 5.5 percent throughout the appeals process.

This is the same rate the jury used to determine the $58 million in damages it ordered Vonage to pay Verizon. Separately, the District Court required Vonage to post a bond of $66 million to secure Verizon's damages judgment.

Last month, a jury found that Vonage had infringed three patents owned by Verizon, and it ordered Vonage to pay $58 million in damages to the company. On Friday, a federal judge issued an injunction barring Vonage from using the technology and signing up new customers until the company stopped infringing. That same day a federal appeals court granted a temporary stay of the injunction.

Vonage has maintained throughout the case that it is not infringing on any of Verizon's patents. And it has argued that Verizon is simply trying force it out of business.

"Vonage continues to believe that this case is an attempt to do in the courtroom what Verizon could not succeed in doing in the marketplace--which is to put Vonage out of business," it said in its press release issued Monday.

Vonage went public in May 2006 at $17 per share. Shares in the company have declined steadily since then. It closed at $3.37 per share on Thursday before the injunction order was issued.