Vonage Holdings Corp. must pay $120 million to Verizon Services Corp. to settle a patent dispute with Verizon after the U.S. Court of Appeals for the Federal Circuit denied a petition by Vonage for a rehearing.

In June 2006, Verizon Services brought a lawsuit against Vonage Holdings to enforce several Verizon patents relating to voice over Internet protocol (VoIP) services.

In its defense, Vonage claims it was working around Verizon's technology and using its own since the filing last year. Customers were not affected throughout the litigation process, claimed Charles Sahner, director of corporate communications for Vonage, Holmdel, NJ.

"In the phone space, intellectual property litigation is very commonplace, it's part of the industry landscape," Mr. Sahner said. "We've learned to manage our litigation and manage our business at the same time."

A Verizon spokesman declined to comment for this report.

A jury in March held that Vonage was infringing on three Verizon patents but not guilty of infringing on two patents. The appeal by Vonage requested that the federal court reconsider the lower court verdict on two of the patents held by Verizon.

Details of a settlement deal were posted on the Federal Court Web site Oct. 25. Vonage would have owed $80 million plus royalties to Verizon if a rehearing were approved. The denial of that appeal resulted in an additional $37.5 million being awarded to Verizon.

The Verizon settlement includes a $2.5 million payment from Vonage toward various education-based charities, bringing the total payout to $120 million.

Vonage is a leading provider of digital phone services with 2.45 million subscriber lines.

Vonage plans to shift focus now to making sure the services are as feature rich as possible and as responsive to people's lifestyles as possible, Mr. Sahner said. The company is tightlipped about its new services, but it does intend to be a presence in the mobile sphere in 2008.

"We're going to be meeting people's needs very aggressively and portability is a key need," Mr. Sahner said.

Though litigation is over, Vonage faces broader strategic challenges as cable giants such as Time Warner and Comcast target the digital phone services market.

"We see that there will be these players moving forward and we feel like we're an essential need for people as an alternative to traditional service," Mr. Sahner said. "We want to be the most feature rich and that's where the challenge lies."

Vonage also resolved patent disputes with wireless carrier Sprint Nextel and telecoms giant AT&T.

Vonage announced last month that it was entering into a licensing arrangement with Sprint's Voice over Packet (VOP) patent portfolio. Through this agreement, Vonage has access to more than 100 patents for methods, components and systems to connect telephone calls between a landline network and a packet-switched network such as the Internet.

"Anytime we can resolve disputes amicably and work with companies to provide better services, we're rather do that," Mr. Sahner said.