Ruling Vaporizes Vonage

Shares hit a new low after an injunction in a patent case.
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Updated from 2 p.m.


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shares plunged 26% after the Net calling shop got slapped with an injunction.

Just two weeks after a jury found that the Holmdel, N.J., telco had infringed on three


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patents, a federal judge granted Verizon's request for an injunction against Vonage. The ruling bars Vonage from using some of the technologies involved with its voice-over-the-Internet service.

Vonage pledged to appeal but said it doesn't expect any dial-tone brownouts.

"We are confident Vonage customers will not experience service interruptions or other changes as a result of this litigation," said CEO Mike Snyder.

Still, shares plunged $1.05 to $3 after earlier touching a new low of $2.98. Shares fetched $17 apiece last May at the company's $531 million IPO.

"Our fight is far from over," Snyder added. "We remain confident that Vonage has not infringed on any of Verizon's patents -- a position we will continue vigorously contending in federal appeals court -- and that Vonage will ultimately prevail in this case."

Two weeks ago, in the wake of the patent infringement decision, Vonage issued a statement saying customers won't lose service and that the company "is not going out of business."

A federal jury in Arlington, Va., decided earlier this month that Vonage should pay Verizon $58 million for damages and 5.5% in future royalties for its unauthorized use of some voice over Internet protocol technologies.

At the time, Vonage said it was "equipped to handle" the costs if it's indeed forced to pay the fine and royalty charges. The company also says it's confident that it could block a potential injunction and successfully appeal the ruling.

Injunction vexes Vonage

In its IPO registration statement, Vonage generally outlined some of the risks it faced building a service on VoIP, a technology it said it couldn't fully patent.

"While we have several pending patent applications and recently acquired three patents from Digital Packet Licensing Inc. that enable VoIP technology, we cannot patent much of the technology that is important to our business," the 2006 filing reads.