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Vonage's woes grow as Verizon files suit
Cries patent infringement...

By Marguerite Reardon

Published: Tuesday 20 June 2006

The bad news for internet phone provider Vonage keeps piling up, as the company now faces a patent infringement lawsuit from telephone giant Verizon Communications.

On Monday, less than a month after the company's disappointing debut on the New York Stock Exchange, Vonage acknowledged that Verizon, the second-largest phone company in the US, has filed a lawsuit charging that Vonage infringed on seven of its patents related to its voice over IP, or VoIP, service - called VoiceWing.

Verizon's complaint was filed last Monday in a US District Court in Virginia. It alleges Vonage infringed on patents held by Verizon that describe technology for completing phone calls between VoIP users and people using phones on the traditional public switched network, authenticating VoIP callers, validating VoIP callers' accounts, fraud protection, providing enhanced features, using wi-fi handsets with VoIP services and monitoring VoIP caller usage.

In a statement released on Monday, Vonage said its "services have been developed with its own proprietary technology and technology, licensed from third parties". The company also said it would "vigorously defend [against] the lawsuit". Vonage said it hadn't been previously notified by Verizon that the company thought it was infringing on its patents.

Verizon acknowledged it had filed the complaint but a company representative declined to comment further. The representative also would not clarify whether the company is looking into filing lawsuits against other VoIP providers.

The lawsuit comes shortly after Vonage's disappointing stock market debut. The company lost nearly 30 per cent of its value in the first week of trading. The internet telephony provider has also been gearing up to defend itself against several investor lawsuits. Shareholders allege the company misled them and created artificial demand for the stock.

News of the Verizon lawsuit sent shares of Vonage down $1.03, or 8.13 per cent, to $8.22.

Marguerite Reardon writes for CNET News.com