Vonage Holdings Corporation
(NYSE:VG) shares rose more than ten percent today after the company
announced that it has settled its patent dispute with Nortel Networks
without paying any money out of pocket. Investors have been concerned
for some time that the VOIP provider may be forced into bankruptcy if
it was ordered to pay hefty fines to old-telecom companies that it
walked over. Shareholders applauded the move as it marks one of the
final lawsuits hovering over the company.
The new settlement involves a limited cross license to three Nortel
and three Vonage patents and dismisses claims relating to past damages
and remaining patents. Vonage was initially dragged into this lawsuit
after it acquired Digital Packet Licensing, which was suing Nortel at
the time for the violation of three patents. Vonage continued the
lawsuit before it was countersued by Nortel, who claimed that Vonage
was violating 13 of its own patents and asked that the VOIP provider be
shut down and kept from using the technology.
This settlement is a great deal compared to Vonage’s settlements in
four other patent lawsuits where it was forced to pay the other side
money for prior use of its product. These lawsuits sent Vonage shares
tumbling amid worries that they would be forced to shut down their
service because they were in violation of basic patents on the
technology itself. However, these were all resolved in exchange for
cash, where AT&T received $39 million while Sprint and Verizon
received a total of $200 million.
In the end, this is good news for Vonage who now appears to be
cleared of outstanding lawsuits that threatened to send them into
bankruptcy. Shareholders are hoping that the company can now turn
itself around and focus on building revenues and profitability.
Combined, these factors make VG a stock worth watching closely!
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