A patent infringement lawsuit filed by AT&T against voice-over-IP telephony provider-Vonage has been settled, according to Vonage representatives.

The settlement brings an unusually speedy end to the lawsuit, which was filed by AT&T on Oct. 17. It alleged Vonage wilfully infringed an AT&T patent related to telephone systems that allow people to make VoIP (voice-over-Internet Protocol) calls using standard telephone devices. A breakdown in talks between the two companies over the issue led to the lawsuit, said AT&T at the time.

Less than a month later, on Nov. 7, the two companies said they had tentatively agreed to a settlement. At that time Vonage said it would pay AT&T around US$39 million under the terms of the settlement.

Final terms were not disclosed on Friday when, in a brief statement, Vonage said the dispute had been settled.

Vonage previously settled a patent suit with Verizon Communications for $80 million to $120 million, depending on the results of its appeal of a court ruling on two patents, and with Sprint Nextel for $80 million. As part of the Sprint Nextel deal Vonage agreed to license more than 100 patents covering technology for connecting calls from a traditional phone network to an IP network. The Verizon settlement came after a court found Vonage had infringed upon the carrier's patents.

But eBay still hopes to avoid writing a check.

"We are disappointed with the court's order and we plan to appeal it," the San Jose-based company said in a statement Wednesday.

EBay believes Friedman could have rejected the judgment, based on recent U.S. Supreme Court rulings on the laws governing patent enforcement.

The case already has been tied up in years of appeals, including an issue that landed in the U.S. Supreme Court.

The dispute revolves around eBay's "Buy It Now" option, which sells merchandise at a fixed price instead of fluctuating bids. MercExchange contends the system tramples on its patented technology.

A federal jury sided with MercExchange in 2003, concluding that eBay should pay $35 million in damages. The award was later reduced to about $25 million. With interest accumulating since then, the value of the judgment has climbed back up to about $30 million, according to both MercExchange and eBay.

MercExchange had hoped to use the jury's findings to win a court order that would have prevented eBay from continuing to use the "Buy It Now" feature.

The legal wrangling over MercExchange's bid for an injunction against eBay culminated in a pivotal ruling by the U.S. Supreme Court last year. The high court decided that judges aren't automatically required to block a technology from being used even after a jury finds a patent violation like eBay's.

In addition to the judgment, MercExchange wants millions in licensing fees for use of its patented technology since the 2003 verdict. EBay has vehemently declined to pay.

Since the legal tug-of-war began, MercExchange's payroll has shrank from more than 40 employees to three. Thomas Woolston, MercExchange's president, is trying to revive the company's growth by licensing patents to other e-commerce sites.

Meanwhile, eBay has already accounted for the MercExchange judgment on its books. And it ended September with $3.9 billion in cash.

Viacom's lawyers said in court papers that the company dropped the M2 name in 1999 and called the channel "MTV2."

M2 Software, however, continued to press for monetary damages and a cut of Viacom's profits attributable to the trademark infringement, as allowed by federal law.

A federal district court in 2004 accepted a compromise proposal from Viacom and issued an injunction barring Viacom from using M2 or "M2: Music Television" in the future.

But the district court and the 9th U.S. Circuit Court of Appeals ruled that M2 Software wasn't entitled to damages or a portion of Viacom's profits because it hadn't shown that the infringement was intentional.

M2 Software appealed to the Supreme Court, arguing that federal law does not always require that trademark infringment be intentional for a trademark holder to seek a portion of profits.

The Supreme Court's decision lets stand the appeals court's ruling.

Under the Oct. 25 settlement deal, Vonage was required to pay $120 million if its request for a court rehearing were denied, including $2.5 million to charity. Had the court granted Vonage a rehearing, Vonage would only have had to pay $80 million.

In seeking to overturn the lower court verdict, Vonage had argued that the judge who oversaw the trial misconstrued key claims in three of the patents at issue and gave the jury the wrong instructions on how to interpret technical terms.

However, in September the same appeals court upheld most of the verdict and reaffirmed an order barring Vonage from using Internet phone call technology related to two of the patents Verizon claimed had been infringed.

Vonage Holdings said late Thursday it has settled its patent dispute with Verizon Communications.

Vonage said the terms of the resolution depend on how the Court of Appeals decides its pending petition for rehearing regarding two of the Verizon patents.

If Vonage wins rehearing on either patent or if the injunction is vacated, Vonage said it will pay Verizon $80 million.

If Vonage does not win a rehearing, or if the stay is lifted reinstating the injunction, Vonage will pay Verizon $117.5 million.

In March 2007, a jury found that Vonage was infringing three valid Verizon patents and awarded $58 million in damages.

The trial judge subsequently issued an injunction which was stayed pending Vonage's appeal.

In September, the U.S. Court of Appeals for the Federal Circuit upheld the trial court's decisions on infringement, validity and injunction as to two of the Verizon patents and remanded as to the third patent.

Vonage said it filed a petition for rehearing which is pending in the Court of Appeals.

Two weeks ago, a federal jury in Kansas City, Kan. ruled that Vonage violated Sprint's patents and ordered the company to pay $69.5 million in damages.

Holmdel, N.J.-based Vonage is engaged in a similar patent dispute with Verizon Communications Inc. that could prove quite costly.

Battered by legal setbacks, Vonage stock has taken a nosedive since the company went public in May 2006 at $17 a share. Yet the Sprint settlement sent the company's stock up more than 40% to $1.67 in early trades.

In March, a federal jury in Virginia ruled that Vonage violated three Verizon patents related to technology used to link Internet calls to traditional phone networks and to retrieve voice mail. The company was ordered to pay $58 million in damages on top of a 5.5% royalty fee.

Just one day after the Sprint decision, the U.S. Court of Appeals for the Federal Circuit in Washington, D.C. upheld the earlier Verizon ruling. The court found that Vonage violated two of the three patents, but send the third patent back to the lower court for further review.

Vonage has developed and deployed technological fixes to get around the Verizon patents in question, but the courts have not ruled on whether the "workarounds" are valid.
"Vonage has taken steps to ensure that the workarounds do not infringe on the Verizon patents as construed by the court," spokesman Charles Sahner said.

Vonage provides inexpensive Internet-phone service to almost 2.5 million customers, although growth has slowed recently. The company has scaled back marketing expenses to save money while it sorts through its legal issues.

"We are disappointed that the jury did not recognize that our technology differs from that of Sprint's patents," Sharon O'Leary, chief legal officer for Vonage, said in a statement.

The loss-making Internet phone company said it believed any damages awarded were inappropriate, but said it would try to develop technology to work around Sprint's patents.

Sprint sued Vonage in 2005, making 61 claims of violations of seven patents related to telecommunications technology. The U.S. District Court in Kansas had rejected Vonage's motion to dismiss the case last month.

Sprint spokesman Matt Sullivan said the jury, in addition to the $69.5 million award in damages for past infringements, ordered a 5 percent royalty rate on future revenue.

Vonage shares closed down 66 cents at $1.30 on the New York Stock Exchange.

The legal setbacks are only part of the problems facing Vonage, which has posted heavy losses since going public in May 2006.