Voice over Internet Protocol (VoIP) phone company Vonage has lost a patent court case with telco giant Verizon that will cost it $58 million and a 5.5% royalty on future sales.
Vonage was found to have violated three Verizon patents related to the process of making telephone services work over the internet. Some of the patents related to the transfer of calls between traditional telephone networks and internet phone systems.
Verizon sought $197 million in damages for wilful violation of seven patents. It won its case only on three of those, and the court ruled that any violation was not wilful, which meant that Verizon could not claim the triple damages allowed if that had been the case.
Vonage, a relative newcomer to US telecoms, has tried to build a mass market for the previously niche product of VoIP telephony. The company said it will appeal the verdict, which was handed down by the Federal District Court for the Eastern District of Virginia.
"Of the seven patents Verizon originally sued on, they prevailed on only three and we expect that verdict to be reversed on appeal," said a Vonage statement.
The court said that in addition to the $58 million award, Vonage would have to pay 5.5% of its revenues to Verizon while it continued to infringe the patents.
Verizon immediately filed for a court injunction to prevent Vonage from using the patent-violating technology at all, and a hearing on that injunction is set for later this month.
Verizon claimed during the trial that it had lost 600,000 customers to Vonage. Vonage is thought to have around two million customers overall.
Vonage floated on the public markets in the US last year but has not been able to establish itself as a profitable enterprise, losing $286 million last year on revenues of $607 million.
During the case Vonage claimed that Verizon's patents were invalid and that the technology it used was either built by it or licensed from third parties.