October 8, 2007 / 2:33 PM / 10 years ago

Sprint, Vonage settle patent dispute

NEW YORK (Reuters) - Wireless service provider Sprint Nextel Corp (S.N) agreed to settle a patent lawsuit against Vonage Holdings Corp (VG.N) for $80 million, triggering a sharp rebound in the Internet phone company’s shares on Monday.

Under the agreement, Sprint will also license its technology, which helps connect phone calls between Internet and telecom networks, to Vonage, the two companies said.

A jury in federal court found in September that Vonage had infringed patents belonging to Sprint, and ordered the company to pay $69.5 million in damages plus future royalties. Vonage had said it would appeal the verdict.

The news of a settlement pushed Vonage shares up 74 percent to $2 in composite trade. However, they are still a fraction of their May 2006 initial public offering price of $17.

Vonage said the deal would help the company concentrate on its business.

“It allows us to put this litigation behind us and continue to focus on our core business by removing the uncertainty of legal reviews and long-term court action,” said Sharon O‘Leary, general counsel for Vonage.

    The Holmdel, New Jersey-based company has suffered through a string of legal setbacks. A U.S. appeals court late last month upheld a verdict that Vonage infringed two patents held by Verizon Communications Inc (VZ.N).

    Vonage was a pioneer in selling Web-based phone services to consumers looking for a cheaper alternative to regular phone services, but now faces growing competition from cable and other Internet companies. Analysts have also voiced concerns over its losses from heavy marketing spending.

    Sprint shares were down 54 cents, or 2.8 percent to $18.47 in midday trading on the New York Stock Exchange.

    Reporting by Ritsuko Ando

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