Vonage settles patent suit with Verizon for no more than $120 million: now they'll turn to AT&T

Reuters reports this afternoon that Vonage says it has settled a patent disput with Verizon.Vonage said the final terms of the settlement depend on a court of appeals decision on Vonage's petition for a rehearing on its patents, but the amount will be capped at $32 million in addition to $88 million already held in escrow.

Reuters reports this afternoon that Vonage says it has settled a patent disput with Verizon.

Vonage said the final terms of the settlement depend on a court of appeals decision on Vonage's petition for a rehearing on its patents, but the amount will be capped at $32 million in addition to $88 million already held in escrow. That's $120 million

Here's Vonage's take:

Vonage today announced that the cost of its settlement of a patent dispute with Verizon will be effectively capped at a maximum of $32 million, in addition to the $88 million already accrued and held in escrow. The $88 million includes a $66 million cash-collateralized bond, a $12 million second-quarter escrow payment, and a $10 million third-quarter escrow payment made in the fourth quarter of 2007.

Vonage and Verizon earlier today announced they have agreed to resolve their patent lawsuit. The terms of the resolution depend on how the Court of Appeals decides Vonage's pending petition for rehearing regarding two of the Verizon patents (the '574 and '711). If Vonage wins rehearing on either the '574 or '711 patent or if the injunction is vacated as to the '574 or '711 patent, Vonage will pay Verizon $80 million. If Vonage does not win rehearing on either the '574 or '711 patent, or if the stay is lifted reinstating the injunction, Vonage will pay $120 million, which includes $2.5 million payable to certain charities.

"We're pleased to put this dispute behind us and believe this settlement is in the best interests of Vonage and its customers," said Sharon O'Leary, Vonage Chief Legal Officer. "This settlement removes the uncertainty of legal reviews and long-term court action and allows us to continue focusing on our core business and customers."

The latest decision in the litigation came on September 26, 2007 when the U.S. Court of Appeals for the Federal Circuit partially remanded a March 8 jury verdict in the U.S. District Court of Alexandria, Va. that the company infringed on three Verizon patents. The appellate court remanded the infringement verdict on the 880 patent and affirmed the verdict on one patent claim in each of the 574 and 711 patents. The appellate court vacated the entire damages award of $58 million and the 5.5 percent royalty, and directed that the trial court retry those aspects of the original case. Vonage's petition for a rehearing en banc was filed on October 10, 2007.

Now presumably, the Vonage execs and lawyers will try to sculpt a similar deal with AT&T. But given that Vonage is settling left and right, how long before opaque patent trolls sue Vonage for a pound of flesh?

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