Vonage (NYSE:VG) shares jumped $0.47, or 40.88%, to $1.62 after the company announced that it settled its patent dispute with Sprint Nextel (NYSE:S) in a press release. The deal will include a $35 million payment for past use, $40 million for future use, and a $5 million prepayment for services.

"We are pleased to resolve our dispute with Sprint and enter into a productive future relationship," said Sharon O'Leary, General Counsel for Vonage. "We believe this deal is good news for Vonage, our customers and our shareholders. It allows us to put this litigation behind us and continue to focus on our core business by removing the uncertainty of legal reviews and long term court action."

Vonage shares have been suffering ever since a Kansas jury handed down a verdict on September 25th finding that the company had infringed on six Sprint patents. Many shareholders and analysts were concerned that the company would not be able to fight the legal battle and be forced into bankruptcy. Shares are now trading close to the levels they were before the verdict was announced.

Vonage still faces an uphill legal battle with Verizon Communications (NYSE:VZ), however, which was awarded $58 million in damages in March plus 5.5 percent royalties on future revenues after finding that the company violated three Verizon patents. Vonage executives vowed to fight this ruling but the company may be forced into another large settlement.

In the end, this is good news for shareholders but Vonage still faces an uphill battle. Not only do more legal battles remain on the horizon, but the company must also face the problem it had before all of this started - convincing people to switch to VOIP phone services. Despite all of tihs, VG is definitely a company worth watching!

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