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Vonage says market overreacting to court ruling

NEW YORK (Reuters) - Vonage Holdings Corp. said on Monday the market had overreacted after a federal judge agreed to bar the Internet phone company from using technology patented by Verizon Communications Inc..

A Vonage V-Phone in an undated file photo. A federal judge issued a permanent injunction on Friday barring Vonage Holdings Corp. from using Internet phone call technology owned by Verizon Communications Inc. REUTERS/Vonage Marketing Inc./Handout

Vonage shares plunged nearly 26 percent on Friday after the injunction decision, although U.S. District Judge Claude Hilton said he would delay signing the order for two weeks.

The stock climbed 5 percent in early trading Monday.

“To paraphrase Mark Twain, the rumors of Vonage’s death have been greatly exaggerated,” Vonage Chief Executive Officer Mike Snyder said in a statement. “Friday’s events represented one small step in what is sure to be a long legal battle.”

Vonage said the litigation would likely take years, but it was confident it would continue to provide service to its more than 2.2 million subscribers.

He said the market’s reaction showed “an unfortunate lack of understanding of the judicial/appellate system, a lack of appreciation of Vonage’s resourcefulness, or, perhaps, both.”

Friday’s injunction came after a jury on March 8, found Vonage had infringed three patents owned by Verizon, and said Vonage must pay $58 million plus 5.5 percent royalties on future sales.

Vonage said that if the judge enters a permanent injunction against it on April 6, but fails to grant the company’s request to stay the injunction pending its appeal, Vonage will immediately file for a stay with the court of appeals.

It also plans to file a notice of appeal to set aside the March 8 jury verdict, it said.

Vonage shares rose 15 cents to $3.15 in early New York Stock Exchange trading although the move was a modest rebound compared with its recent, massive slide. It has lost around 80 percent of its value since the initial public offering at $17 last May.

In addition to legal woes, which also include a patent infringement case by Sprint Nextel Corp. and litigation linked to its IPO, investors are also concerned about increasing competition from cable companies and other Internet phone companies.

The company has struggled to turn a profit while spending on advertising its service to expand its subscriber base, and posted a net loss of $65 million in the last quarter.

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