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.