Verizon Suing Vonage Over Patents

Internet phone service provider Vonage Holdings Corp. (VG) on Monday said it has been served with a patent infringement lawsuit filed by two units of Verizon Communications Inc. (VZ).

Adding to its woes since a weak stock market debut last month, the lawsuit from Verizon Service Corp. and Verizon Laboratories Inc. alleges that Vonage had infringed on seven patents related to voice-over-Internet Protocol (VoIP) technology, the companies said.

Vonage said in a statement it believed its services had been developed with proprietary technology and technology licensed from third parties, and the company intended to "vigorously defend the lawsuit."

The company's VoIP services allow customers to make calls over the Internet at lower rates than traditional phone companies.

But with an increasing number of Internet firms as well as cable and telecom companies offering similar services, Vonage's initial public offering (IPO) in May was the year's worst performer. The shares have fallen 44 percent from the $17 per share IPO price.

Investors have also been wary about Vonage's persistent losses due in part to its massive advertising campaign. The company has acknowledged in its IPO prospectus that it might never turn a profit.

Vonage is also contesting various lawsuits following the weak IPO.

Some of the complaints allege the omission or misstatement of facts concerning its customer directed share program, a plan which was aimed at boosting customer loyalty by offering shares at the IPO price but backfired as the shares tanked.