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Vonage stock rises as Nortel settles patent claims

Vonage may be on the brink of one of its "best ever years" after resolving a patent claim which it acquired when it bought Digital Packet Licensing in 2004 - but it's not clear how shareholders will benefit yet. The deal was described as "the last of them" by the VoIP phone company when it announced settlement of a dispute with Nortel this week.

According to a full report in Reuters, Vonage shares rose eight per cent on the news, a deal which "would put to rest the last of the major litigation against Vonage after it settled suits brought by AT&T Verizon Communications and Sprint Nextel," in 2007.

However, Bloomberg reports that the optimistic announcements may be premature, saying that there are still some problems. "Still pending is a lawsuit filed by another patent holding company, Web Telephony LLC, in federal court in Marshall, Texas. A trial is scheduled for March 2009," the report said.

An official statement from Vonage gave few details, saying that it "involves a limited cross license to three Nortel and three Vonage patents and will not call for any monetary payments by any party."

The patents are said to involve emergency service calls technology, which was one of the levers used by established telcos when they attempted to get VoIP phone companies closed by American Federal authorities for failing to provide such features.

The official announcement added: "Claims relating to past damages and the remaining patents will be dismissed without prejudice. The settlement is subject to final documentation."

"We are pleased to resolve this issue and enter into a productive relationship with Nortel," said Vonage Chief Legal Officer Sharon O'Leary.

Talk about "profitability" by Yankee Group consultants may be premature, as it's only nine months since the consensus of VoIP watchers was that Vonage would go bankrupt before mid 2008. But, as blogger Rich Tehrani of TMCNet put it: "I think their prospects are better than many have realized or give them credit for. That's my feeling about Vonage. Let's see what happens in the upcoming quarters."