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Judge Orders Vonage to Stop Signing New Customers

Decision in Verizon Patent Case is a Major Blow to Vonage

By Truman Lewis
ConsumerAffairs.com

April 6, 2007

Vonage • Appeals Court Gives Vonage a Reprieve • Vonage CEO Exits as Company Struggles to Survive • Vonage Gets a Reprieve but its Future is Murky • Judge Orders Vonage to Stop Signing New Customers • Class Action Charges Vonage Deceived Consumers • Vonage Settles New Jersey Charges • FTC Drops Vonage 911 Inquiry But Continues Telemarketing Probe • Vonage Accused Of Violating Securities Laws • Vonage Customers Chafe Under Stock Purchase Plan • Vonage IPO Fails To Meet Expectations • Vonage 911 Caller Put On Hold While House Burns Down • Consumer Complaints

In the latest blow to Internet telephone carrier Vonage, a federal judge has ruled the company must stop signing up new customers until it stops infringing on patents held by Verizon.

Vonage has promised its investors it will grow quickly to reach profitability -- something it won't be able to do if it can't sign new customers. The company said it will immediately appeal the judge's ruling, which followed a decision by a jury in Alexandria, Va., that Vonage had infringed on key Verizon patents.

Vonage also faces a consumer class action filed in U.S. District Court in California which charges that it misled consumers about the quality and reliability of its service and engaged in false advertising and deceptive business practices.

In his decision, U.S. District Judge Claude Hilton said he considered whether the order could result in bankruptcy for Vonage, which has seen its stock price plummet in recent months. He said he concluded that there is adequate competition in the telecommunications industry and that, whether or not Vonage survives, the public will have adequate access to telephone service.

Verizon sued Vonage in June, claiming that Vonage had illegally used key technologies owned by Verizon to connect Internet calls to regular telephone networks and claimed it had lost hundreds of thousands of customers to Vonage as a result of the infringement.

Vonage, which currently has 2.2 million subscribers, says it is working on alternative means of handling calls.

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