CrunchGear

Bubbly, nationally advertised Vonage may lose the right to offer VOIP services at the hand of Verizon. On Friday, Verizon won its patent infringement case against upstart Vonage by being awarded a 5.5% royalty for use of patented technologies with $58 million in past damages due.

Specifically, Verizon holds a series of patents, including US 6430275 covering a means for tracking customer accounts and billing. Additional patents cover added core functions that Vonage uses to connect its internet service to telephone networks. Verizon may not be happy with just royalties.

Vonage’s fate rests in the courts as Verizon has requested that the court issue a permanent injunction to stop Vonage from using the patented technology. Vonage has specifically stated that Verizon filed this suit to stifle competition. In an attempt to counteract this suit, Vonage purchased three patents and has a number of additional applications and has filed its own infringement suit against Verizon, but has had little luck in bringing Verizon to early negotiations.

Vonage has had a troubled past since it pushed forward with an IPO that saw problems almost immediately. Nonetheless, it has spent much of its capital in its brand and marketing efforts including $269 million in the first nine months of 2006 on $425 million in sales. As a result, Vonage has yet to turn a profit, and patent infringement loses and a resulting royalty (if it gets the right to operate) will not help. Vonage has promised to appeal if courts do rule for an injunction, but the potential of Vonage users losing service to a court decision has a bit less shock value when compared to Crackberry users almost losing their fix.

For more background on the case, click here.