14 DAY TRIAL // On June 2006, Verizon Wireless has filed a suit against the Internet phone provider Vonage in the US District Court for the Virginia Eastern District for infringing three of its patents referring to the way Vonage connects the calls coming from its Internet protocol service to the traditional networks and to some other features of call-waiting implementation and voice-mail services.
Today, Vonage has been found guilty of infringing those patents; therefore, the company will have to pay Verizon Communications monetary damages of 58 million $. That might put the Internet provider in a situation when it will be forced to declare bankruptcy because, as the market analysts say, they are already losing money.
Clayton Moran, an equities analyst for the Standford Group, has said that: "Vonage is already losing money. If you add the expenses of the damages, royalties and the ongoing legal battles, it just throws their future profitability into question. [...] Even though the damages could have been worse, the royalty fees and ongoing legal battle, will add more expenses. And that could impact the future profitability of the company."
Despite the very dark future the experts see for Vonage, the company should be thankful for not having to pay the amount of money Verizon asked in the first place because, probably, that would have meant an immediate shut down of its services.
When the lawsuit began, Verizon asked for no more and no less than 197 million $ in damages. However, one of the experts Vonage has brought to testify for them estimated the maximum sum the Internet provider would have to pay to be around 69 million $. Later, during the suit, the jury decided Verizon will get only 58 million $ by using a formula that calculated the damages by adding a 5.5 percent of the revenue Vonage makes per month from each and every customer they have.
What will be the outcome of this whole deal nobody knows at the moment but, considering its 286 million $ losses for the fourth quarter of 2006, things aren't looking very good for them. At least they have the cash to pay Verizon because Vonage ended the quarter with about 500 million $ in cash and that means the money they have to pay to the mobile operator accounts for only 12 percent of their cash.
That doesn't seem to be very much but all the financial market analysts say this court decision will be a serious blow for the future profitability of the company.