• Wired, Thursday, April 26, 2007 1:13 PM

Vonage is breathing easier now that it's been granted a series of reprieves in its patent-infringement case against Verizon Communications, but that calm could be short-lived. A Verizon victory could have disastrous implications -- not just for Vonage, but for the Internet telephony business at large.

Indeed, voiceover Internet protocol providers are watching this case closely, as one of three Verizon patents Vonage was found to have infringed upon could affect the way other VoIP providers connect their services to the public telephone network. The case before the U.S. Court of Appeals for the Federal Circuit is a litmus test that may well determine the future of the telecom industry.

The little guys, like SunRocket and Packet8, could be immediately affected by a ruling in Verizon's favor, which would prevent them from connecting their Internet phone services to the public phone network. Longer-term, that ruling could affect more established Internet phone players like eBay's Skype.

Vonage, meanwhile, has been granted a crucial stay that allows it to continue selling VoIP service to new customers as the federal court mulls its appeal. Vonage was forced to pay Verizon $58 million in damages, plus a 5.5% royalty rate per customer. Company execs claim that the court's decision expands well beyond what was intended by Verizon's patent. The rest of the Internet telephony industry hopes so, too.

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