Nortel-Vonage dispute ends in cross-licensing

Vonage Holdings and Nortel Networks have preliminarily agreed to cross-license several patents, ending a dispute between the companies without any monetary payments, Vonage said earlier this week.

All claims relating to past damages as well as remaining payments will be dismissed, the company said. Documents sealing the agreement have not yet been finalized. Nortel had sought damages and a permanent injunction against Vonage around the use of its technology.

Vonage’s suit had come in the wake of another it filed against Nortel earlier this year that alleged Nortel violated three of Vonage’s patents. Two of the patents involved in that suit — numbers 4,782,485 and 5,018,136 — concern multiplexed digital-packet telephone systems. The third patent — No. 5,444,707 — concerns packet-switching communications systems. Vonage acquired these three patents from Digital Packet Licensing in 2006.

The agreement is a minor victory for Vonage. The company has settled or reached tentative agreements in three other patent disputes related to VoIP (voice over Internet Protocol) and other telecommunications technology for what could ultimately reach US$239 million in payments.

Vonage tentatively agreed last month to settle a patent infringement lawsuit filed by rival AT&T for $39 million. Prior to that deal, Vonage had reached settlements with Sprint Nextel for $80 million and with Verizon Communications for $80 million to $120 million, depending on the results of an appeal.

Last month, Vonage reported net losses of $160.5 million in the third quarter of this year, more than twice the $65.8 million loss it reported for the third quarter of 2006. Overall, the company has lost $266.6 million so far this year, and it has incurred net losses of more than $500 million in the past three years.

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